Trump started the metals rally, now he's the reason it's ending

The U.S. election of Donald Trump lit a fire under metals markets in 2016 as investors took a liking to his pro-business agenda. Now, copper and other metals are tanking as Trump's trade war against China threatens to derail economic growth.

Copper sunk to an almost one-year low and has fallen 16 percent from a high in June. All the major metals were in the red on Wednesday as the U.S. unveiled tariffs on $200 billion worth of Chinese-made products. Mining stocks also took a hit, with Glencore Plc and Kaz Minerals Plc falling more than 4 percent. Even gold, considered a haven asset, fell as trade angst boosted the dollar, making commodities more expensive for holders of other currencies.

Industrial metal markets are often viewed as an economic bellwether and the losses suggest that traders are starting to price in a slump in global growth. Manufacturing gauges are already showing signs of weakness after a run of strong performance, and the fear is that more tariffs will further dent economic activity.

"The jump in copper prices after President Trump was elected was due to the fact that he promised a massive infrastructure package," Simona Gambarini, a commodities economist at Capital Economics, said by phone from London. "Of course, that package did not actually happen and the boost to investment was minimal, and now we are obviously in protectionist territory and that doesn't bode well for the prospect of growth in China."

While the new list of targeted Chinese imports covers a wide range of products, demand for copper and other metals could be hit if the tariffs come into effect as proposed in September. More than 120 copper products are mentioned, and the metal plays a crucial role in other electrical products.

Copper prices are still up 25 percent since the start of November 2016, the month Trump was elected.

"We'd had a brief pause from the trade war's negative drag on base metals, but it's come back with a vengeance today," Nicholas Snowdon, an analyst at Deutsche Bank, said by phone from London. "The key issue now is what kind of trade war we're going to get."