By Paul R. La Monica

Copper is having a whopper of a run. It isn't too late for investors to join in, though President Donald Trump holds the keys to further gains -- or losses, if he backs off his tariff threats.

Trump's latest salvo -- a 50% tariff on copper imports -- shocked the market. The consensus on Wall Street was for a 10%-25% levy, ever since Commerce Secretary Howard Lutnick ordered a Section 232 national security investigation into copper imports in February. Lutnick says a 50% tariff will kick in by Aug. 1.

Investment banks such as Goldman Sachs think the threat is credible, as do many traders. Goldman analysts see a 60% chance of a 50% tariff priced into December 2025 contracts, according to a recent note. Copper in the U.S. is around $5.60 a pound, near record highs. Prices are up nearly 40% this year, including a 12% gain after Trump's tariff threat on July 8.

Copper is known as the "Ph.D. of metals," since it's considered a leading indicator for the global economy and industrial activity. Demand has been healthy, and it's getting a shot in the arm from the global data center buildout, vehicle electrification, and power plant upgrades to meet rising electricity demand for artificial intelligence, smartphones, and other technologies.

Trump wants more domestic production, but that wouldn't happen for years, leaving the country heavily dependent on imports. Over the past few years, the U.S. imported nearly half the copper it consumes, mainly from Chile, at 65% of imports, and Canada, at 17%. Peru and Mexico account for another 9% and 6%, respectively.

For now, there's a stockpiling rush as companies try to front-run tariffs, and it's distorting prices. Copper in the U.S. is trading nearly 30% higher than prices on the London Stock Exchange. There's typically very little difference between U.S. and London prices, notes Jacob White, the exchange-traded funds product manager at Sprott Asset Management, a metals investing firm. If Trump backs off from a 50% tariff, prices could tumble back to where they were before the tariff announcement.

Prices could also slide for another reason: U.S. buyers who bought excess inventory may exit the market as prices stay elevated, says Jefferies analyst Christopher LaFemina.

For traders, it may pay to wait for a dip. "While a short-term air pocket with lower prices is possible, we would buy our preferred copper mining equities on any near-term weakness," LaFemina says.

If you aren't a commodities trader, there are two broad ways to invest: betting on the commodity directly with an ETF, or buying shares of copper mining stocks or a fund.

The cleanest way to get commodity exposure is via an ETF. The United States Copper Index fund (ticker: CPER) is the largest and only pure play, holding futures contracts for September, December, and March 2026 delivery, along with Treasury bills and cash. The fund is up 38% this year, largely tracking copper's price. But it has drawbacks: Futures must continuously be rolled over, adding trading expenses, and the fund's expense ratio of 1% will drag on returns.

While there aren't other copper ETFs, there are plenty of mining funds. The largest are the SPDR S&P Metals & Mining ETF $(XME)$ and iShares MSCI Global Metals & Mining Producers ETF $(PICK)$. Both own shares of copper miners, along with companies that produce other metals. The funds are up nearly 20% this year.

Mining companies won't track the commodity as closely as the copper ETF, but their diversification provides a buffer if copper prices tank. And they have other growth drivers, with plans to expand mines and refining operations.

Among large-caps, Freeport-McMoRan may be the best bet for riding the U.S. tariff train. The miner is the largest U.S. copper producer, with mines in New Mexico and Arizona. It generated 74% of its revenue from copper sales in 2024, giving it the most leverage to copper of the large-cap miners. Freeport also operates smelters and refining facilities, accounting for 70% of U.S. refined production.

Freeport operates globally, and the company is expanding in the U.S., Chile, and Indonesia, aiming to boost copper output from four billion pounds this year to 4.3 billion in 2027. Freeport is also a gold miner and is benefiting from a jump in the metal's prices.

Freeport "stands uniquely to benefit from higher U.S. prices," RBC Capital Markets analyst Sam Crittenden said in a note, recommending the stock. Deutsche Bank analyst Liam Fitzpatrick is bullish, too, saying in a report that the company is "a clear beneficiary compared to global copper peers" thanks to the Trump tariffs.

Freeport isn't cheap at 28 times earnings estimates, slightly above its five-year average. The average price target on Wall Street is $50, implying 6% upside from recent prices around $47.

Still, the stock is trading 15% above its 200-day moving average of $41, indicating that it has some support and could keep moving up.

Crittenden also likes smaller companies with U.S. projects that would benefit if tariffs are sustained. Two of his top picks are Hudbay Minerals and Arizona Sonoran Copper. Both have mining operations in Arizona. Hudbay is the larger company, with a market cap of $4.2 billion; Arizona Sonoran is tiny, with a market valuation of $400 million. It trades on the Toronto Stock Exchange.

Both stocks are considered "junior miners," making them especially dicey. Funds like the Sprott Junior Copper Miners ETF $(COPJ)$ bundle dozens together, mitigating some of the risk. Northern Dynasty Minerals, Solaris Resources, and NGEx Minerals are three of its top holdings. The ETF is up 40% this year.

Mining stocks and ETFs will come under pressure if copper prices slump. While Freeport has some insulation from its gold operations, and ETFs holding other miners have buffers, the commodity ultimately drives returns, and industrial metals (aside from gold) tend to move in tandem.

More negotiations between Trump's trade officials and foreign producers such as Chile and Canada are likely. The stocks would slump on signs of a deal. Betting that "Trump always chickens out" on tariffs -- a trade known as TACO -- has been profitable. For miners, it would be the other way around.

Given the volatility that likely lies ahead, it may pay to sit tight, wait for the copper fever to break, and then take a flier on the copper train.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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July 11, 2025 02:00 ET (06:00 GMT)

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