How to navigate trade war's metals and mining conflicts using ETFs
Last week, Trump announced plans for a 50% tariff on imported copper to go into effect August 1. Then, the Pentagon announced it would become the largest shareholder in rare earth miner MP Materials as the U.S.-China trade war specifically has highlighted the urgent need for the U.S. to shore up its own supply of rare earth elements. MP Materials owns the only operational rare earth mine in the U.S. at Mountain Pass, California, about 60 miles outside Las Vegas.
On Tuesday, Apple announced a $500 billion deal with MP Materials for domestic supply of neodymium magnets used in Apple products. The two companies also plan on creating a rare-earth recycling line allowing industrial scrap and electronics to be reused in Apple products.
MP's stock has nearly soared since the beginning of the year, up over 270% after the Apple deal, but the broader metals and mining sector has been rising as well.
Last week, the SPDR S&P Mining and Metals ETF (XME) hit its highest price since 2011. Both MP Materials and Freeport McMoRan, a major global metals mining company with major copper mines in the U.S., are among the top 10 holdings in XME. After its recent spike, MP Materials has become the second-largest holding in XME, after steel maker Cleveland Cliffs.
Meanwhile, the VanEck Rare Earth ETF (REMX) has increased by more than 17% over the last month.
Copper prices rose after the Trump tariff announcement, and the metal had its biggest one-day gain since 1989. While U.S. buyers could end up paying $5,000 more per metric ton than other copper buyers around the world, investors are benefitting. Copper is the third-most-consumed metal globally, behind iron and aluminum. The U.S. imports nearly half of the copper it uses, according to the U.S. Geological Survey.
FCX owns seven copper mines in North America, and controls four of the five largest U.S. copper mines. Its shares are up over 20% year-to-date.
"Copper is the second most used material by the Department of Defense," Trump wrote in a post on Truth Social about the tariff plans.
There are several metals and mining ETFs that focus on copper, specifically, including the iShares Copper and Metal Mining ETF (ICOP) and Global X Copper Miners (COPX), both higher by roughly 16% this year; and Sprott Copper Miners ETF (COPP), up a little over 12%. Freeport McMoRan is the largest holding in ICOP and COPP, while No. 2 overall in COPX. It is considered one of the stocks likely to benefit the most from Trump's tariffs, according to Bank of America analysts.
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