Donald Trump winning the US election and imposing tariffs would have a negative impact on industrial commodities in 2025, Marcus Garvey, head of commodities strategy at Macquarie, said during a pre-LME week briefing in London on 25 September.
“An obvious risk for political implications is if Trump wins, and if he goes through with tariffs as proposed, being 60% on China and 10% on the rest of the world,” he noted at the event attended by Kallanish. “It’s fairly clear it will be a meaningful net negative to the global industrial cycle as it would be a negative shock to US consumption.”
“The US is still the dominant source of global end goods consumption, and the ability to … have a restocking cycle globally would be very, very challenged. If that happens, it is a meaningful bearish downside risk to industrial commodities in 2025,” he added.
Garvey pointed out tariffs are “inherently inflationary” and would also be a net negative hit to the consumer.
“The scope, if it has a negative impact on demand, of the Fed to respond to it, is therefore challenged,” he said, adding that this could create a stronger dollar which would also be negative for commodity prices.
He did not see the potential tariffs as stimulatory for commodities demand, with several reasons why it was negative for demand or price in dollar terms.
Focusing on existing macro perspective, Macquarie economists forecasted a “modest” acceleration in global growth, around 3% year-on-year, over the next six quarters. This would result in a modest tailwind for the sector, with commodity prices expected to be somewhat supported.
Garvey also noted that the causation of the US interest rate cuts by the Federal Reserve was the key driver, with any possible changes linked to the existing market conditions. “It’s the underlying driver, not the rates themselves that are really going to matter.”
Elsewhere, Jim Lennon, Macquarie global commodities consultant, said the consultancy now thinks stainless steel will be the biggest contributor to demand growth for nickel, having downgraded the outlook for batteries, and upgraded the stainless outlook.
He noted the outlook downgrade on the battery side was due to a revision of global electric vehicle sales forecasts from 44 million vehicles by 2030, to 38m, and a lower share of lithium iron phosphate batteries in the mix.
“The stainless market, which is two thirds of demand, has been growing at around 4-5% a year trend and the battery market has been growing at 15% trend growth,” he said. “China, in particular, brought on a huge amount of new production capacity; the price of stainless steel is half of what it is in Europe and the US, generating positive substitution towards stainless steel.”
Carrie Bone UK
