By: Leslie Hayward, Senior Vice President of Public Affairs, SAFE, Abigail Hunter, Executive Director of the Center for Critical Minerals Strategy, SAFE, and Zubeyde Oysul, Senior Policy Analyst for the Center for Critical Minerals Strategy, SAFE
The United States holds impressive copper reserves, yet these have not translated into supply security. The United States’ fully integrated domestic copper supply chain eroded over the last few decades as permitting challenges made it harder to open new mines, stricter environmental standards raised the costs of maintaining heavy industrial operations at home, and smelting capacity migrated toward demand centers, particularly China. By 2024, the nation’s global market share of mine production and refining stood at 5 percent and 3 percent, respectively. The loss of domestic production capacity over the years prompted the Trump administration’s Section 232 investigation into copper imports, which roiled the copper market until new tariffs took effect on August 1. Today, the United States is left with two primary copper smelters. This pales in comparison to China’s rapidly expanding capacity, which already produced more than half the global output in 2024. The surge in Chinese capacity, with smelters allegedly being built in as little as nine months, has outpaced both global mine development and downstream demand, creating a global glut. Massive excess capacity has eroded smelter margins globally, making it increasingly difficult to maintain, let alone expand, capacity in the U.S. and allied countries.
Defense demand for copper is growing
Copper is indispensable in national security applications. Used in everything from wiring to munitions, and pervasive throughout defense equipment, with each F-35 fighter jet containing approximately 1,200 pounds of copper in its wiring, electronics, and weapons systems.
Global and American military copper demand is expected to grow annually by 14 to 18 percent for the foreseeable future, according to various estimates. In 2026, global military demand is expected to be 4.22 million tonnes per year, according to defense consultancy Simon Hunt Strategic Services. For context, the United States mined 1,100,000 tonnes of copper in 2024 and refined 890,000 tonnes.
Domestic production should be enough to meet U.S. defense demand today. However, the United States is not on track to meet this expected growth in copper demand from military and other strategic applications. While there is a push to improve permitting for both mining and refining through executive efforts such as FAST-41 project designations, emergency declarations, waivers, and streamlining regulatory measures, these steps alone cannot overcome the more fundamental market challenges facing domestic smelting. Even with these executive efforts, the United States faces the fact that there are no major new primary smelting projects underway to support future demand growth, which presumably underpins the national security threat assessment outlined in the new 232 copper tariffs.
Ways the new copper tariffs could help improve domestic supply security
The new Section 232 tariffs are strong on semi-finished and downstream copper products. For copper derivatives, the initial announcement mainly targets insulated wires and cables used in telecommunications and the automotive sector, though more products are likely to be added in the future. While these are not the most vulnerable stages of the supply chain, they are a smart first step to discourage circumvention of future upstream tariffs. Building on the initial announcement, the Trump administration has signaled that additional tariffs on refined copper are forthcoming.
While this approach, with a plan to phase in future tariffs, helps balance trade-offs and aligns with some SAFE recommendations, it remains to be seen whether future tariffs on copper input materials starting at 25 percent will be enough to spur investment in domestic smelting and refining.
Other important provisions of the new tariffs include the following:
- With multiple 232 investigations underway—where investigations for finished goods often overlap with those for material inputs and their derivative products—avoiding tariff duplication and added burdens is critical. The copper 232 announcement clarifies that these tariffs do not stack with 232 tariffs for autos. Vice versa, the copper tariffs do not apply to products subject to the auto and auto parts tariffs.
- China’s position as a major purchaser of copper input materials and scrap gives it significant market power. A domestic sales requirement for these products could potentially support new and expanded U.S. smelting, refining, and recycling capacity by reducing competition from foreign buyers, but timing matters.
Will the Section 232 copper tariffs result in a new domestic smelter?
Trade barriers alone cannot overcome the challenge presented by China’s strategic overinvestment in certain segments of global metals and mineral markets. With more than half of global smelting capacity, China sets the global treatment and refining charges (TC/RCs), partly thanks to scale and state support, and its ability to accept lower TC/RCs than U.S. competitors.
China’s copper smelting overcapacity hurts U.S. smelters by pushing benchmarks down. TC/RCs have fallen so low that smelters are effectively operating at a loss and, in certain cases, even paying to process material when they should be earning fees. Low TC/RCs can benefit U.S. miners who can export copper concentrates abroad, but they do not help support the fundamental economics needed to build a new domestic copper smelter. This added challenge comes on top of the higher capital and operating costs U.S. projects face.
One promising development is the introduction of a domestic sales requirement, which would require 25 percent of U.S.-produced copper input materials — including copper concentrate — to be sold domestically rather than exported. This could give future U.S. smelters more leverage in supply negotiations and help improve their TC/RCs. Its effectiveness, however, will ultimately depend on its implementation.
Due to the vertically integrated operations of the United States’ only two operational primary smelters, which already direct all mined output to their own smelters, the United States is unlikely to see significant direct benefits from a domestic sales requirement. The key question is how the policy will free up additional volumes just in time to supply new smelting capacity. If sufficient smelter capacity does not exist to absorb the input material, future domestic sales mandates could squeeze miners’ margins and discourage investment in new mining projects.
Smelting is not the only pathway
Not all U.S. copper production requires smelting. High-purity copper scrap can be remelted and recast into new products without the need for smelting. Recycling, while an important pathway to increase domestic production, cannot meet the growing demand that exceeds the volume of available secondary material alone. Alternative pathways to primary production, outside of smelting, are also available and should be taken advantage of. Some deposits are well suited for solvent extraction–electrowinning (SX-EW), which can produce high-purity cathode copper without the need for a smelter. Similarly, mine tailings can be reprocessed using chemical or biological leaching, offering a pathway to recover copper from legacy waste streams without building new smelting infrastructure.
One area where several companies are pushing for innovation is low-grade sulphide leaching. There has been promising progress, but companies have yet to demonstrate this technology on a commercial scale. This is an area where U.S. government support for innovation—long a recognized strength of the American economy—could make a decisive difference, as many low-grade copper sulphide deposits in the western United States could benefit directly from these advances. Because leaching is generally far less capital-intensive than building a new smelter, this alternative pathway has the potential to be cost-competitive and reach production more quickly once the technology is proven.
Coordination with strategic partners
China is the world’s largest consumer of copper and remains a net importer, but its massive and expanding smelting overcapacity distorts global markets. Copper producers in allied and partner jurisdictions where the United States primarily imports from—and where many U.S. companies operate mines and smelters or are looking to develop new projects—face the same China-driven overcapacity pressures as domestic producers. Crucially, these countries do not undermine U.S. supply-chain goals the way China’s state-supported smelter expansion does. In most cases, these countries are also at risk of losing production capacity or are struggling to advance downstream because of China’s market dominance.
It is not in the United States’ interest to unintentionally harm copper production in partner countries and further contribute to China’s dominance, particularly in smelting and refining. Moving forward, strengthening coordination with these partners to address global overcapacity and align remedies against market distortions will be essential. A diverse and resilient global copper market not only reduces dependence on China but also supports the long-term success of U.S. producers.
Key questions moving forward
- The Proclamation directs the Secretary of Commerce to establish a product “inclusion” process to add copper derivative products to these tariffs. The lack of a timeline creates some uncertainty here, and we will be watching which variables the administration considers in adding included products.
- The domestic sales requirement will be enforced using Defense Production Act Title I authorities, which allow the federal government to allocate materials and prioritize domestic supply in support of national defense and industrial base needs. While enforcement could take the form of individual allocation orders, it remains unclear whether the administration will apply the requirement uniformly to each producer or design an industry-wide framework allowing coordination among firms. The approach taken will significantly affect compliance flexibility and create uneven impacts between producers with and without access to domestic smelters and refineries.
- The definition of “high-quality copper scrap” remains pending. Clarification will be important for determining which scrap grades are covered under the domestic sales requirement and how the policy will affect existing trade flows.
- It remains to be seen whether potential future tariffs on refined copper will generate enough market confidence to sustain a durable price premium for more domestic investments into the critical midstream steps. If implemented credibly, such tariffs could help send the long-term price signals needed to incentivize new U.S. smelting and refining capacity.
Conclusion
Copper is essential. Expected shortfalls in the coming decade create both an opportunity and a warning: rising demand could incentivize new supply, but failure to meet it will deepen future constraints. Current market conditions, however, give little indication of these looming pressures. The Section 232 investigation puts actions on the table to remedy the situation, but China’s strategic smelting overcapacity will remain a barrier. Keeping 25 percent of U.S. supply domestically, combined with new technologies that refine copper without smelting, can create some new opportunities. However, whether the tariff regime will ultimately create a signal to invest in copper refining remains to be seen.
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