Could Trump’s Tariffs Impact the Gold Price?

One of the key initiatives President Trump promised when he was elected was the implementation of tariffs on a wide variety of imports from numerous countries. According to Trump, tariffs would, among other things, boost American manufacturing, pay for tax breaks, and reduce the size of the federal budget deficit.

While there’s still a great deal of uncertainty regarding the overall size and scope of his entire tariff package, President Trump recently put into effect tariffs on imports from Canada, Mexico, and China.

Stock markets reacted negatively, with fears of a trade war sending markets lower. But stock markets aren’t the only markets that react to tariffs.

Markets for other assets could be impacted as well, including markets for precious metals like gold and silver. So what kind of effect could President Trump’s tariffs have on the gold price?

3 Key Takeaways

• Recent economic data suggests that the gold price rises in response to tariff increases and export bans
• President Trump’s tariff implementation is raising fears of trade wars and a potential new Great Depression
• Safe haven demand for gold in response to tariff fears could be helping drive the gold price upward recently

The Effect of Tariffs on Gold

Tariffs haven’t really been a major component of economic policy for decades, with the signing of the General Agreement on Tariffs and Trade (GATT) and its development into the World Trade Organization (WTO) having reduced average tariffs from 22% in 1947 to 5% by 1999.

That means that there’s no real recent long-term data to determine how tariffs affect gold prices. But there is some recent short-term data.

During President Trump’s first term, he shocked markets by imposing tariffs, particularly on imports from China. And those impacted gold prices.

According to CMC Markets, Trump’s imposition of tariffs in 2018 and 2019 was followed by jumps in the gold price. And while the gold price initially remained relatively stable during President Biden’s term, it jumped after Biden implemented export bans on AI equipment and computer chips.

That seems to indicate that imposition of tariffs results in higher gold prices. Will that hold true for the current round of tariffs?

What President Trump Is Doing on Tariffs

The most recent round of tariffs implemented by President Trump will result in tariffs of 20% on goods from China, 25% on goods from Canada, and 25% on goods from Mexico. And Trump has pledged to implement reciprocal tariffs on goods from a number of other countries beginning in April.

The gold price has already risen 11% this year, driven in part by fear of further tariffs and a growing trade war. If Trump goes ahead and imposes further tariffs in April, or if the trade spat with China, Mexico, and Canada worsens as the year progresses, that could spur further safe haven buying and a potential rise in the gold price.

One interesting aspect of a potential trade war is that the threat of tariffs has led to large inflows of gold into the United States, with COMEX gold inventories reaching levels last seen during COVID. Overall COMEX registered and eligible gold inventories have increased 300 and 500 tonnes respectively.

At first glance you might wonder why gold inflows would increase, but gold is a commodity like any other, and is imported and exported all over the world. In the event of rising tariffs, even imports of gold bars or gold coins into the US could be subject to tariffs, hence the move to build up inventories ahead of any tariff actions.

Gold as a Safe Haven Asset

Gold has served as a safe haven asset for centuries, offering shelter and harbor during times of economic uncertainty. And, whether you agree with his policies or not, President Trump’s actions seem to be leading to possible greater uncertainty for markets.

Markets are starting to price in the possibility of a trade war, and the impact that could have on American consumers. There’s no real way of knowing today how long this trade spat could go on, how intense it could become, or just how much it could impact prices for goods and services.

But fear is certainly growing, and fear is often a driver of gold demand. So even if a trade war results in negative impacts on stock markets, economic growth, or consumer prices, the growing fear it generates could result in a positive impact on gold prices.

Does Gold Play a Role in Your Plans?

While many people are still optimistic about President Trump’s ability to fix the US economy, there are still many questions surrounding what he will do and how it will impact global trade and the US economy.

Throw in the seemingly omnipresent threat of government shutdowns, and it seems that there are numerous economic problems confronting not only the Trump administration but also Congress this year.

The potential for economic disruption, the continued problem of inflation, and growing uncertainty about the future could help push the gold price higher as the year progresses. Americans who own gold could be poised to take advantage of that.

Are you one of them?

There are numerous ways to buy and own gold today, whether you’re interested in just buying a few coins or in putting part of your retirement savings into gold.

Buying physical gold coins and gold bars remains popular, with bar and coin demand remaining strong. But did you know that you can also buy gold coins and gold bars with tax-advantaged assets?

Gold IRAs allow you to purchase physical gold coins or gold bars and hold them in a tax-advantaged IRA account. You can fund that gold IRA account with a tax-free rollover from your existing 401(k), 403(b), TSP, IRA, or similar retirement accounts.

Buying physical gold doesn’t require you to sell assets from your retirement accounts in order to fund a gold purchase. With a gold IRA you can buy gold coins or gold bars with your existing retirement savings, benefit from all the same tax advantages as any other IRA account, and even take your distributions in gold coins or gold bars when you choose to take a distribution.

If you’re uncertain about the future and want to hedge against any potential impact of tariffs, now may be the time to start learning more about gold. Call Goldco today to learn more about how a gold IRA could help you weather possible future economic uncertainty.