(Bloomberg) -- Base metals declined after US President Donald Trump said he would likely enact tariffs on Mexico and Canada by Feb. 1, hurting market sentiment even as he held off from imposing levies on China.
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On his first day back in power, Trump said that he may put import tariffs as high as 25% on goods from the two neighboring nations. That pushed up a gauge of the dollar, which had fallen sharply on Monday, making metals more expensive for most buyers.
The prospect of renewed global trade conflict — along with China’s shaky economy — weighed on metals in recent months, with copper down 11% last quarter. Trump’s initial cautious tack on China provides some relief, but leaves traders guessing how his policies toward Beijing will shape up.
“Tariffs on China are still like a sword hanging over the head, even if there are none on the first day,” Jia Zheng, head of trading at Shanghai Soochow Jiuying Investment Management Co. said by phone.
Traders are also cautious as China approaches its major Lunar New Year holiday, and with a Federal Reserve policy meeting on next week’s diary, Jia said.
Calling Beijing
The newly installed US president has ordered staff to investigate whether Beijing had complied with a trade deal signed during his first term, according to a copy of a documents seen by Bloomberg News. Trump said he would be having “meetings and calls” with Chinese President Xi Jinping.
On the London Metal Exchange, lead traded almost 1% lower, while aluminum — which closed Monday at its highest in more than two months — fell 0.5% to $2,677.50 a ton by 12:23 p.m. Shanghai time. Zinc dropped 0.4%
Iron ore, used in steelmaking and much more closely tied to demand in China, rallied. Futures rose as much as 1.3% to $105.15, the highest since Dec. 17.
--With assistance from Winnie Zhu and Jake Lloyd-Smith.
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