Here’s How Tariffs Could Impact the Precious Metals Market

 

Here’s How Tariffs May Impact the Precious Metals Market

History tells us that while tariffs may not directly influence precious metal prices, these policies tend to lead to conditions that lead to higher demand for safe haven assets like gold and silver. 

Of all the economic issues raised by candidates during the 2024 presidential election, tariffs were perhaps the most controversial. Donald Trump, who won the election, promised a series of sweeping tariffs, including a universal tariff on all imported goods. The President-elect’s campaign argues that these tariffs would improve the strength of the United States economy and help bolster the position of the U.S. dollar. As a candidate, Mr. Trump also expressed his belief that a system of tariffs can also be used as a tool to achieve America’s foreign policy objectives and cut the national debt. Opponents of the plan disagree, saying that tariffs would inflame diplomatic-economic relations with allies while increasing prices for American consumers. 

Some experts say that the precious metals industry is uniquely susceptible to price fluctuations when new tariffs are introduced into the world economy. Because so many coins, bars, and rounds are imported goods, it seems likely that universal tariffs will lead to inflated premiums for these foreign-made precious metal products. History shows us, however, that the truth is at least a bit more complicated. 

On this page, learn how tariffs may impact the precious metals market, as well as gold and silver prices. 

What Are Tariffs? 

Tariffs are taxes that a government imposes on the import of goods from foreign nations. Typically, governments use tariffs to accomplish several different goals. Strategic tariffs on specific goods can protect domestic industries from collapsing due to international competition, and tariffs in general help provide revenue to a government. In the case of the United States, tariffs are implemented to accomplish both of these goals. 

There’s been a lot of talk of tariffs lately, since President-elect Donald Trump has repeatedly emphasized his belief that universal tariffs can help improve the USA’s standing abroad while helping the country pay down its significant national debt. If implemented, a blanket tariff could potentially apply to trillions of dollars worth of foreign goods. 

Tariffs and Precious Metals – Potential Impacts Explained

Here’s the truth: Nobody has a crystal ball, so it’s impossible to know for certain how tariffs would impact precious metal prices. Because Donald Trump doesn’t officially take office until January 20th of 2025, we don’t even know what his actual tariff policies are going to be. As a result, any speculation about how tariffs will impact the gold and silver markets is just that – speculation. 

Still, history teaches us a number of important lessons about how gold and silver react to new tariffs, and economists have been debating the potential effects of tariffs for decades. 

So what would tariffs do to the precious metals market? Many experts agree that tariffs can have three major impacts on the precious metals market:

1. Higher premiums on foreign-made bullion products.
2. Heightened demand for metals because of inflated consumer prices. 
3. Higher gold prices due to safe haven buying.

Below, we’ll take a closer look at the various ways that President-elect Trump’s tariff proposals could impact the international market for precious metals. 

High Premiums On Foreign-Made Precious Metal Products

Many of the most popular coins, bars, and rounds in the precious metals market are made outside of the United States. As one might expect, a blanket tariff on imported goods, if applied to investment-grade bullion, would increase the total cost of bringing these products to American consumers. Typically, companies forced to pay a premium when importing products pass that cost onto the consumer by reflecting it in the total retail price of the item. 

In the precious metals industry, we usually refer to this added cost as a premium. If the United States government introduced a blanket premium on imported goods, many industry experts believe that premiums for foreign coins, bars, and rounds would increase. 

Would Tariffs Incentivize Investors to Buy U.S. Mint Bullion?

While tariffs would probably make foreign coinage more expensive to buy, this would boost the appeal of United States Mint gold and silver. Of course, this is sort of the point of having a tariff in the first place. By instituting a tariff, a government can discourage consumers from buying foreign goods, which makes domestic companies more competitive in selling those same goods. So although universal tariffs may lead to higher premiums on foreign precious metals, these same tariffs could help the U.S. Mint grab a larger share of the domestic market. 

Before you get too excited, there’s no guarantee that the U.S. Mint would be immune to the price hike associated with consumer goods under a tariff-based monetary policy. The United States imports at least some gold and silver each year, and the cost of bringing this metal into the U.S. Mint could lead to higher consumer-side prices. 

Higher Demand For Metals Because of Inflated Consumer Prices

Inflation was a major issue in the 2024 election, and addressing high consumer prices is likely to be a cornerstone of the Trump administration’s second term in office. Critics of Trump’s tariff proposal say that the plan would do more harm than good, especially where consumer prices are concerned.

As we discussed above, blanket tariffs on imported goods would likely lead to higher prices for imported coins, bars, and rounds. The same is true for all imported goods. The United States imports a massive number of consumer goods ever year, including food items that Americans use every day. After tariffs became a significant platform for the Trump campaign, a number of economists warned that the President-elect’s plans would lead to higher prices on many goods that Americans need to survive. 

If President-elect Trump’s tariff plans lead to higher consumer prices, investors may turn to precious metals as a consistent store of value. This point becomes especially relevant if other countries retaliate with their own tariffs, a move that could further diminish the purchasing power of the United States dollar. 

Increasing Gold Prices Due To Safe Haven Buying

Another potential consequence of a tariff-heavy monetary policy has less to do with prices and more to do with international relations. In the modern world economy, tariffs are considered an aggressive foreign policy. Introducing universal tariffs could lead to inflamed tensions with other countries. Even more importantly, some countries may retaliate to American tariffs by applying their own tariffs on goods imported from the United States. If this were to happen, it would spell trouble for a number of American industries. 

This blow-for-blow strategy of tariffs and counter-tariffs is not without precedent. During Donald Trump’s first term in office, the United States entered a trade war with China after a series of tariff policies instituted by both countries. While trade wars rarely develop into armed conflicts, they do represent a deterioration of geopolitical relations between countries. 

Precious metal prices tend to increase during periods of geopolitical instability and tension escalation between world powers. Since tariffs run the risk of inflaming tensions between the United States and other nations, a universal set of tariffs could lead to higher gold and silver prices as consumers seek to protect their assets from uncertainty. 

The Big Tariff Question – How Will Other Countries Retaliate?

Part of what makes tariffs such a speculative political question is that we don’t yet know how other countries would react to Mr. Trump’s proposed policies. If Trump’s position is correct, tariffs could usher in a booming period of dominance and prosperity for U.S. industry and manufacturing. However, entering into trade wars with several other nations would increase the appeal of safe haven assets like gold and silver. 

Bottom line: Tariffs could lead to higher demand and higher prices for gold and silver, especially if other countries retaliate with their own tariffs on goods imported by the United States. 

Historical Trends – How Have Tariffs Impacted Gold and Silver Prices? 

Historically, the impacts of tariffs on precious metal prices have been a mixed bag. To get a better idea of how tariffs have influenced gold and silver prices throughout history, we’ll need to take a look at three specific instances of major tariff reform by U.S. leaders. 

One of the first – and perhaps the most infamous – tariff in American history was the Smoot-Hawley Tariff Act of 1930. This law introduced tariffs on thousands of imported goods and was meant to revitalize the U.S. economy following the Great Depression. The law was unsuccessful; Other countries countered with their own tariffs, leading to an international trade war that made the economic woes of the United States even worse. But more importantly, the economic downturn created by this massive set of tariffs eventually led to the end of the U.S. gold standard in 1933. This set the groundwork for the high gold prices investors see today, which are only possible because the U.S. no longer pegs the United States dollar to gold. 

The next major slate of tariffs in U.S. history had an even more pronounced impact on the value of precious metals. As part of a series of sweeping economic policy reforms known collectively as the “Nixon shock,” President Richard Nixon introduced import surcharges on a number of foreign goods. This decision, along with other components of the Nixon shock, led to the decoupling of gold from the United States dollar. Once again, gold prices increased. Within just a couple of years, gold prices skyrocketed and virtually never slowed down. 

The final major tariff introduced by the United States government happened far more recently. In 2018, during his first term in office, Donald Trump imposed a range of tariffs on China in an effort to strengthen the domestic manufacturing sector. China retaliated with their own tariffs, leading to a trade war that is still ongoing today. Interestingly enough, gold prices did not significantly increase during this time period. Economists say that metal prices remained relatively stagnant after the escalation of the US-China trade war because the Federal Reserve continued to raise interest rates, a move which tends to negatively impact the value of gold and silver. 

In most cases, tariffs either directly or indirectly lead to higher precious metal prices. Will this trend hold if President Trump imposes a universal tariff on imported goods in 2025? Only time will tell. 

Final Thoughts: Will Tariffs Be Good, Bad, Or Something In-Between For Precious Metals? 

At the end of the day, it’s not possible to say exactly how tariffs will impact the precious metals market. Gold and silver prices tend to increase in the short and medium term after major tariffs are imposed by the United States government, but this isn’t always the case. Investors should expect a wide range of possible impacts, should Donald Trump’s tariff proposals become reality. 

You might also be interested in: 

• The Nixon Shock’s Unintended Consequences Explored
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• Will Gold Hit $5000 Per Ounce?