Effect of Tariffs on Gold and Oil Prices

Tariffs—taxes imposed on imported goods—serve as tools for governments to protect domestic industries, generate revenue, and influence trade balances. However, their impact on commodity markets, particularly gold and oil, is multifaceted and can lead to significant price fluctuations.

Impact on Gold Prices

Gold is traditionally viewed as a safe-haven asset, attracting investors during periods of economic uncertainty and geopolitical tensions. Recent tariff implementations have underscored this role. For instance, in February 2025, U.S. President Donald Trump announced substantial tariffs on imports from China, Mexico, and Canada, including a 25% tariff on automobiles and a 10% tariff on Chinese goods. These measures heightened concerns about a potential trade war, prompting investors to seek the stability of gold. Consequently, gold prices surged, reaching record highs above $2,900 per ounce.

The relationship between tariffs and gold prices is complex. While tariffs can drive gold prices up due to increased demand for safe-haven assets, they can also lead to economic slowdowns that reduce industrial demand for gold, potentially exerting downward pressure on prices. Additionally, the strengthening of the U.S. dollar, often a response to tariff-induced economic shifts, can make gold more expensive for holders of other currencies, influencing its global demand and price.

Impact on Oil Prices

The effect of tariffs on oil prices is influenced by several factors, including trade dynamics, supply chain disruptions, and shifts in global demand. In February 2025, the U.S. imposed tariffs on Canadian and Mexican goods, including oil. This move raised concerns about the stability of oil supply chains, especially since the U.S. relies heavily on Canadian crude oil imports. Analysts warned that such tariffs could strain this relationship, potentially increasing U.S. energy costs and contributing to inflation.

However, the direct impact of these tariffs on oil prices may be limited in the short term. Goldman Sachs analysts noted that while the tariffs could widen the discount on Canadian crude, the effect on U.S. gasoline prices would be modest. They estimated a $3 to $4 per barrel wider discount on Canadian crude, with U.S. consumers bearing an additional $2 to $3 per barrel burden.

It's important to recognize that oil prices are also influenced by other factors, such as geopolitical events, OPEC+ production decisions, and global economic conditions. For example, tensions in the Middle East and potential supply disruptions can lead to oil price volatility, independent of tariff policies.

Conclusion

Tariffs can significantly influence the prices of gold and oil, but their effects are complex and multifaceted. While tariffs may drive up gold prices due to increased demand for safe-haven assets, they can also lead to economic slowdowns that reduce industrial demand for gold. Similarly, while tariffs can disrupt oil supply chains and potentially increase energy costs, their direct impact on oil prices may be limited in the short term. Therefore, investors and policymakers must consider a range of factors, including economic indicators, geopolitical events, and market dynamics, when assessing the potential effects of tariffs on commodity prices.