LONDON: Base metals fell on Tuesday as the risk of possible trade wars hurting current trade flows resurfaced after President Donald Trump suggested the United States could impose a 25% tariff on imports from Canada and Mexico from Feb. 1.

Three-month copper on the London Metal Exchange (LME) lost 1.0% to $9,182 a metric ton in official open-outcry trading, while aluminium was down 1.5% to $2,650. Copper and aluminium hit their highest since Dec. 11 and Nov. 25, respectively, on Monday as Trump in his inauguration address neither immediately imposed import tariffs nor targeted trade with top metals consumer China.

The relief, however, was short-lived as Trump later said he was thinking about imposing 25% duties on imports from Canada and Mexico on Feb. 1. He also said that he wanted to reverse the US trade deficit with the European Union. “With Trump back in the White House, the downside risks have increased for industrial metals and potential US tariffs and a stronger dollar are likely to weigh on demand,” said Ewa Manthey, a commodities analyst at ING. A stronger US currency makes dollar-priced metals more expensive for other currency holders.

Canada is a major supplier of aluminium to the United States, and this metal is likely to be the most impacted by tariffs on Canadian imports, if they are imposed, and would result in higher aluminium prices in the US, Manthey added.

Further downside for growth-dependent metals may come this year if the timing and the scope of the US tariffs lead to persistent US inflation and delay interest rate cuts by the Federal Reserve.

As of now, the Fed is expected to hold interest rates steady on Jan. 29 and resume cutting in March. LME zinc slid 1.2% to $2,928 in official activity, while lead lost 1.8% to $1,950. Both zinc and lead markets were in a small deficit in January-November, according a global industry group. Tin shed 0.2% to $30,325, while nickel fell 0.3% to $16,050.