SINGAPORE: Commodities including oil, copper and agricultural products dropped on Thursday as U.S. President Donald Trump’s aggressive tariffs on key trading partners fuelled fears of recession, while safe-heaven gold jumped to an all-time high.
Trump announced a 10% minimum tariff on most U.S. imports, with significantly higher duties on goods from dozens of countries including China, which is likely to prompt countermeasures potentially driving up prices and reducing demand for U.S. goods.
“The higher-than-expected reciprocal tariffs have predictably raised worries of a U.S. recession and slower global growth,” Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia said in a note.
“Copper and oil futures, which typically track the global growth narrative, have declined this morning. Oil demand growth is particularly leveraged to emerging economies, especially in Asia, where some of the reciprocal tariffs are high.”
Stock markets plunged, with the high-flying tech sector taking a hit, as new tariffs pushed the total levy on most Chinese imports to 54%.
Retaliatory tariffs by China, the world’s biggest importer of agricultural goods, could further dent demand for U.S. products such as soybeans, which have already declined since the trade war during Trump’s first term in 2018.
China said it will take countermeasures, which it has yet to specify.
“Any retaliatory tariffs by impacted countries could weigh on global economic growth. The subsequent impact on industrial activity would see commodity markets come under pressure,” said Daniel Hynes, senior commodity strategist at ANZ Research.
Beijing raised duties last month on $21 billion worth of U.S. agricultural products in response to Washington’s earlier round of tariffs on Chinese goods.
SOYBEANS AND OIL
Soybeans, corn and wheat fell around 1.5% on Thursday.
Oil prices fell by as much as 3% as Trump’s tariffs threaten to slow global economic growth and intensify trade disputes, potentially dragging down oil consumption.
Brent futures were down 2.2% at $73.28 a barrel as of 0314 GMT and U.S. West Texas Intermediate crude futures were down 2.4% to $69.98.
“The scale of some of Trump’s tariffs will raise global demand concerns,” ING commodities strategists wrote, referring to energy markets. “There’s also increased uncertainty, with markets waiting to see how trading partners retaliate.”
Energy products including crude oil, natural gas and refined products will be exempt from the new tariff rates.
Copper and aluminium traded on London Metal Exchange lost more than 1%. In March, the U.S. imposed effective tariffs of 25% on steel and aluminium imports.
Spot gold hit an all-time high of $3,167.57 on Thursday.
Gold, traditionally seen as a hedge against political and financial uncertainty, has surged over 19% this year amid the tariff uncertainty, potential for interest rate cuts, geopolitical conflicts and central bank buying. – Reuters
