- Commodities rallied after the U.S. announced a 90-day pause on most reciprocal tariffs, lifting oil, natural gas, copper, and grains.
- The U.S. simultaneously raised tariffs on Chinese imports to 125%, keeping U.S.-China trade tensions elevated.
- Prices were also supported by supply constraints, but investors remained wary of recession and demand risks.
- Non-Chinese suppliers of strategic metals gained on expectations of supply-chain shifts, while inflation and policy durability stayed uncertain.
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The Reuters‐sourced primary article reports that commodities—including energy, metals, and grains—surged dramatically after President Donald Trump announced a 90-day pause on many of his newly enacted reciprocal tariffs, albeit excluding China. Oil prices (Brent and WTI) reversed earlier drops, natural gas futures jumped ~10%, copper gained nearly 3%, and agricultural commodities led by soybeans posted gains. The tariff pause immediately lifted a weight from risk assets and improved sentiment in markets previously rattled by fears of recession.
But the situation is complex: simultaneously, the U.S. increased duties on Chinese goods from 104% to 125%, and China responded with its own tariffs, elevating trade uncertainty overall. Metals, especially copper and aluminum, benefitted from the easing headline tariffs; however, trade tension with China continues to pose a headwind—dampening demand outlook even as supply constraints add upward pressure to prices.
Supply side dynamics also played a role. Natural gas prices benefitted from both the tariff pause and a recent decline in output. Oil’s rally was driven largely by sentiment reversal from recession fear toward optimism. Agricultural prices were more mixed: soybeans outperformed, but concerns remain given China’s position as the top importer and potential for supply substitution or import source shifts.
Strategic implications include:
- Producers outside China (in metals and rare earths) may find an opening as markets digest eased U.S. reciprocity with many trade partners, particularly if China remains isolated in these trade dealings.
- Companies reliant on Chinese supply chains or markets will continue facing risk, especially with sharply higher tariffs targeting Chinese goods.
- Inflation pressures may persist or re-emerge, especially for energy, metals, and food inputs, complicating policy paths for central banks.
- Demand risk is material: recession signals, weak consumer growth, and industrial activity could mute the rally.
Open questions include:
- Will the tariff pause be extended beyond 90 days, or will partial reversals occur once the pause ends?
- How will China respond in kind—through further export curbs, tariff retaliation, or stimulus—and what will be the net effect on global supply and demand?
- Will supply constraints (particularly in energy production and rare earths) loosen, or will they continue to amplify price volatility?
- How will central banks react to inflation-fueling commodity price gains, especially if growth remains fragile?
Supporting Notes
- Oil: Brent futures settled up +4.23% to $65.48/bl; WTI rose +4.65% to $62.35/bl after earlier 7% losses were reversed.
- Natural gas futures rose ~10.1% to $3.816 per million Btu (NYMEX May delivery) under the tariff pause and recent output declines.
- Copper: LME three-month benchmark jumped ~2.8% to $8,897/ton; SHFE copper gained ~3.9%, both rebounding from multi-month lows.
- Chinese tariffs on U.S. goods increased to ~84%, while U.S. tariffs on many imports from non-China countries were paused (90 days), but China’s tariffs on U.S. goods responded aggressively.
- Agriculture: Soybeans posted strongest gains in 2½ months after earlier lows; corn and wheat had modest advances.
- Sentiment shift: Markets moved from ‘extremely pessimistic’—fearing recession—to relatively optimistic. Analysts noted lingering risk with China-U.S. dynamics.
- Rare earth/strategic metals ETF (REMX) jumped ~11.5% following the pause announcement, with outsized gains in companies outside China.