US Metal Tariffs, the COMEX Premium and What It Means for GBP and USD

Most businesses think of tariffs as a trade problem.

They are also a currency problem.

Last week the United States restructured its Section 232 metal tariff regime in the most significant overhaul since the duties were first introduced. The changes took effect on 6 April. If your business touches steel, aluminium, copper, or any product substantially made from them, your cost base changed overnight.

And if you are a UK business exporting metal products to the US, you are in a materially better position than almost every one of your competitors.

That difference has direct implications for how you think about your USD revenues and whether you are hedging them correctly.

Every day, we strip the noise back and ask four simple questions:

Because in FX, outcomes are rarely driven by what is happening. They are driven by the gap between expectation and reality.

On 2 April, President Trump signed a proclamation overhauling how Section 232 tariffs are applied to metals and metal-containing products. The changes are sweeping.

Previously, tariffs on derivative products containing metal were calculated only on the metal content value within the product. That system created confusion and inconsistency. It has now been abolished.

From 6 April, tariffs apply to the full customs value of the imported product, regardless of what proportion is metal. The new rate structure is:

Products where the metal content is less than 15% of total weight by mass are exempt entirely.

The scale of this is significant. The old regime covered roughly 1,055 product codes and $538 billion in US import value. The new framework expands and restructures that coverage, with duties now applied to the full product value rather than just the metal content.

For most of the world, this represents a substantial increase in the effective tariff burden. For UK businesses, the picture is different.

As part of ongoing bilateral discussions between the US and UK governments, UK-origin metal products retain preferential rates under the new regime.

To qualify, the metal content must be genuinely UK-origin. For steel, that means melted and poured in the UK. For aluminium, smelted or most recently cast in the UK. The bar is specific and documentation will be critical.

For businesses that meet those origin criteria:

That is a 25-percentage-point advantage over most global competitors on the higher tier, and a 10-point advantage on the lower tier. In markets where margins are tight and competition is global, that differential is commercially meaningful.

It also changes the FX calculation. If a UK metals business is exporting to the US at a competitive advantage relative to European or Asian counterparts, the value of its USD revenue stream is higher than it was a week ago. How that revenue is hedged, and at what forward rate, is now a more consequential question than it was before 6 April.

The tariff story is not just a trade story. It is feeding directly into inflation, and the mechanism matters for UK businesses and the Bank of England.

Aluminium futures in the UK hit $3,560 per tonne in April, the highest level since March 2022. Over the past twelve months, aluminium prices have risen 46%. The US Midwest aluminium premium reached a record $1.005 per pound in January, a level that directly elevated input costs for manufacturers across North America and fed through into consumer prices.

The driver is not just tariffs. The Gulf region accounts for roughly 9% of global primary aluminium output. The Strait of Hormuz closure disrupted those shipments severely from late February. The situation then deteriorated sharply on 28 March when Iranian missile and drone attacks targeted two of the world's largest aluminium facilities in a single night.

Emirates Global Aluminium's Al Taweelah site in Abu Dhabi, one of the biggest aluminium production complexes in the world, sustained significant damage to its smelter, power plant, refinery and recycling plant. The facility was fully evacuated and entered emergency shutdown. EGA has since declared force majeure on certain products. Full restoration of primary aluminium production could take up to 12 months. Bahrain's Alba, the world's largest single-site aluminium smelter, was struck in the same attacks and is currently operating at just 30% of its normal capacity.

Wood Mackenzie, the leading commodity consultancy, has warned that the combined disruption could remove 3 to 3.5 million tonnes of global aluminium output in 2026. To put that in context, world primary aluminium production was just under 74 million tonnes last year. This is not a temporary blip. It is a structural supply shock.

ONS data confirms the transmission into the UK economy. Metal and non-metallic mineral product inputs rose 4.1% in the year to January 2026, one of the largest contributors to producer price inflation. That figure predates the Hormuz closure, the EGA and Alba shutdowns, and the April tariff restructuring. The pipeline pressure on UK manufacturing input costs is still building.

This matters for FX in a specific way. Higher input cost inflation in the UK complicates the Bank of England's rate path. The more aluminium and metal prices feed into producer prices and then consumer prices, the harder it becomes for the MPC to cut rates even as growth remains weak. That stagflationary dynamic is part of why UK gilt yields are at their highest since 2008 today, and why sterling's strength is fragile rather than fundamental.

COMEX copper futures in New York are currently trading at a premium of approximately $110 per metric ton above LME prices in London. That gap reflects traders rushing to ship physical copper into the US ahead of further potential tariff changes, particularly around a pending US Commerce Department update on refined copper imports expected in June.

When large volumes of physical metal are shipped to the US, the transactions are settled in dollars. That flow creates dollar demand. It is one of the less-discussed mechanisms by which commodity markets interact with FX.

Goldman Sachs has issued warnings about downside risks for copper if disruptions at the Strait of Hormuz persist, noting that slower global growth could reduce industrial metal demand. But in the near term, the arbitrage trade is active and the flows are real.

The copper premium is the short-term signal. What is happening in gold is the structural one.

One of the most significant structural stories in global markets right now is receiving far less attention than it deserves.

Central banks around the world are buying gold at historically elevated levels and simultaneously reducing their dollar reserve holdings. This is not a short-term trade. It is a structural shift in how sovereigns think about reserve management, and it has a direct bearing on the medium-term outlook for the US dollar.

JPMorgan expects approximately 755 tonnes of central bank gold purchases in 2026. That would mark the 17th consecutive year of net official sector purchases since the global financial crisis. The cumulative effect of three years of 1,000-plus tonne annual buying has created a structural floor under gold prices that has absorbed significant volatility without breaking the broader trend.

The driver is de-dollarisation. Following the freezing of Russian central bank dollar assets in 2022, sovereign reserve managers globally accelerated their assessment of the risks of dollar-denominated holdings. The conclusion drawn by many, particularly across the BRICS bloc, was that dollar reserves carry geopolitical risk that gold does not. Gold has no counterparty, cannot be frozen or sanctioned, and maintains value across regimes.

In October 2025, researchers affiliated with BRICS launched a pilot settlement instrument called The Unit, developed by the International Research Institute for Advanced Systems. Each unit is pegged to one gram of gold, backed 40% by physical gold and 60% by BRICS national currencies, and is designed to facilitate trade settlement between member states without routing transactions through dollar-based systems. It remains a research pilot with no confirmed path to full adoption, and it faces significant political and technical hurdles across a bloc whose members hold very different monetary priorities. But its existence is a concrete signal that the search for dollar alternatives has moved from theoretical to operational. It is no longer a conversation. It is a project.

The FX implication is direct. Every tonne of gold purchased by a central bank as a dollar reserve replacement represents net dollar selling. At the scale this buying is occurring, roughly 585 tonnes of quarterly investor and central bank demand according to JPMorgan, the aggregate selling pressure on the dollar is structural rather than cyclical. It does not disappear when geopolitical tensions ease or when a new Fed chair takes over. It is policy.

ETF flows are amplifying this. Gold ETFs saw 275 tonnes of annual inflows in 2025 and that momentum has continued into 2026. When the world's largest institutions are increasing gold allocations simultaneously, the price floor strengthens and the dollar faces sustained competition as a reserve asset. Silver has followed gold higher, driven by both its safe-haven characteristics and its industrial demand in solar panels and electronics, reinforcing the direction of travel across the broader metals complex.

For UK businesses with dollar-denominated commodity costs, the practical takeaway is this. A structurally weaker dollar means your dollar-priced inputs cost less in sterling terms, all else being equal. Today's sterling strength is partly a reflection of that dynamic. The question is how long it lasts, and whether your hedging strategy is positioned to take advantage of it.

Gold is currently trading around $4,749 per troy ounce, having pulled back from an all-time high of $5,595 in late January. The correction through February and March was driven by the Middle East conflict and inflation concerns. The partial recovery since is being driven by the same dollar weakness story we covered in today's gilt auction and JPMorgan earnings article.

Gold is priced in dollars. When the dollar weakens, gold priced in dollars rises. But gold priced in sterling or euros tells a different story, and that distinction matters for UK businesses with commodity exposure.

A business buying gold or gold-linked inputs in sterling is not experiencing the same price environment as a dollar-based buyer. With sterling having strengthened against the dollar today, UK buyers of dollar-denominated commodities are in a relatively better position than they were last month. That window may not last.

The businesses most directly affected by this article fall into three categories.

The first is UK metal exporters with USD revenues. If your products qualify for the preferential UK origin rates, your competitive position in the US market improved materially on 6 April. Your USD revenue forecast should reflect that. If you are not hedging those revenues forward, you are exposed to a sterling that has been strengthening this week.

The second is UK manufacturers importing metal inputs. The aluminium and copper price environment has changed fundamentally. The 46% rise in aluminium over twelve months, the Gulf supply disruption, and the new tariff structure all point to sustained input cost pressure. If your pricing model has not been updated to reflect the current metal cost environment, your margins are being eroded in real time.

The third is any business with commodity exposure that has not reviewed its FX hedging strategy since the dollar started weakening. The interaction between commodity prices, central bank gold buying, dollar weakness, and sterling strength is creating a specific set of risks and opportunities that are worth a conversation now.

At Lamera, we take a different approach.

The near-term outlook will be shaped by three things.

Geopolitical developments. EGA's Al Taweelah facility faces up to 12 months of restoration. Alba in Bahrain is operating at 30% capacity. De-escalation could ease supply concerns and reduce the safe-haven premium in both gold and the dollar, potentially supporting GBP and EUR further. Renewed disruption would tighten metal supply further, keep inflation risks elevated, and could push safe-haven dollar demand back higher, reversing recent currency moves quickly.

The June copper tariff decision. A US Commerce Department update on refined copper imports is expected in June. If tariffs are extended to refined copper, the COMEX premium widens again, dollar demand from physical flows increases, and the arbitrage trade intensifies. UK copper exporters need to be positioned for either outcome.

The Warsh confirmation. As covered in today's earlier article, the Senate hold on Kevin Warsh's confirmation as Fed Chair is introducing uncertainty into the dollar outlook. Any delay reintroduces volatility at exactly the moment when businesses most need a stable rate environment to make hedging decisions.

In this environment, the businesses that move first tend to move best. The window between tariff clarity and market repricing is usually narrow.

How do metal tariffs affect exchange rates? When large volumes of physical metal are shipped to the US to take advantage of price differentials or beat tariff deadlines, the transactions are settled in dollars. That creates dollar demand and can strengthen the USD. Conversely, tariff-driven inflation complicates central bank rate decisions and creates currency volatility across GBP, EUR and USD.

What is the UK preferential rate under Section 232? UK-origin metal products that would otherwise face the 50% tariff pay 25% instead. Products on the lower tier pay 15% instead of 25%. To qualify, steel must be melted and poured in the UK and aluminium must be smelted or most recently cast in the UK. Documentation of metal origin is critical.

Why are central banks buying gold and what does it mean for the dollar? Central banks have been buying gold at historically elevated levels as part of a structural shift away from dollar reserve holdings. Following the freezing of Russian dollar assets in 2022, sovereigns accelerated diversification into gold. Every tonne of gold purchased as a dollar replacement represents net dollar selling. At current buying rates, roughly 755 tonnes expected in 2026 alone, this creates structural medium-term pressure on the dollar regardless of short-term Fed policy decisions.

What is the COMEX-LME copper premium? COMEX copper in New York is currently trading at approximately $110 per metric ton above LME copper in London. This premium reflects traders shipping physical copper into the US ahead of potential further tariff changes. The arbitrage trade creates real dollar demand flows.

Should UK metal businesses hedge USD revenues now? If your business qualifies for the UK preferential tariff rates, your competitive position in the US market improved on 6 April. Sterling has strengthened this week, which means USD revenues convert into fewer pounds than they did a month ago. Whether now is the right moment to hedge depends on two things: your view of where sterling goes from here, and where your business is currently priced.

If your budgeted rate is above current levels, for example you budgeted GBP/USD 1.38 and the rate is now 1.35, you are ahead of budget. The case for locking in now is strong. You are in profit on the currency relative to your plan and in a volatile market protecting that position makes sense. The risk of waiting is that sterling strengthens further and erodes an advantage you already have.

If your budgeted rate is below current levels, for example you budgeted 1.32 and the rate is now 1.35, the decision is harder. You are currently underwater on the currency relative to your plan. Locking in now crystallises that loss but protects against it getting worse if sterling continues to strengthen. Waiting carries the hope that the dollar recovers and brings you back toward budget, but that recovery is not guaranteed. In that scenario, partial hedging, covering a proportion of your exposure now while leaving room to benefit from a dollar recovery, is often the more measured approach.

That is exactly the kind of decision our dealing desk helps businesses navigate. Get in touch to discuss your position.

If you have USD revenues from metal exports, commodity input costs affected by the tariff changes, or any upcoming currency requirement linked to the current market environment, we can help you structure your timing and reduce risk.

Get in touch to discuss your position.