Tariffs—taxes imposed on imported goods—seem simple on the surface. Governments use them to protect domestic industries, raise revenue, or punish foreign competitors. But beneath this straightforward mechanism lies a Pandora’s Box of economic chaos. When tariffs are wielded aggressively or are implemented with haste and a lack foresight, they can spiral into trade wars leading to a destabilization of global markets, inflating prices globally, and in doing so they create a compelling case for owning silver and gold as hedges against the ensuing uncertainty.

Imagine a country slapping a 25% tariff on steel imports. Domestic manufacturers cheer as their competitors’ prices rise, but the celebration is short-lived. The exporting nation retaliates with its own tariffs—say, on agricultural goods or tech products. Supply chains buckle as costs of international manufacturing as well as domestic export costs soar. Businesses foreign and domestic ultimately do not want to bare these price increases and so in most cases end up passing these costs to consumers, igniting inflation. Meanwhile, exporters lose markets, jobs vanish, and diplomatic ties fray. This tit-for-tat escalation is the hallmark of a trade war, and history offers stark examples: the Smoot-Hawley Tariff Act of 1930 put in place over 20,000 different tariffs by the United States and as an unintended consequence deepened the Great Depression by choking global trade.  As countries retaliated with tariffs of their own against the United States and economic activity cratered, it took over a decade to undo the damage done by this trade war.

Where we sit today is very similar to the times prior to the Great Depression.  Economic uncertainly is at a high unseen since the 2008 Great Recession and the United States has engaged in a trade war with Canada, Mexico, and China, and they have shown no signs that the tariffs would stop there.  Canada and Mexico were hit with a 25% tariff, while China was slapped with a 10% tariff.  In response, Canada hit back with tariffs on over $150 billion USD in goods that flow from Canada to the United States, and Ontario Governor, Doug Ford, has threatened to shut off power for the 1.5 million Northern Americans that rely on electricity coming from North of the border.  However, it is China’s response that has the world on edge as the two largest economies in the world appear to be staring down the barrel of a full-on hot war that sends soldiers to the front line.  First off, China announced they would be retaliating with a 10-15% tariff on all U.S. farm products, though, that announcement is not what has the world currently on edge; what does was what the Chinese Embassy released on Wednesday of this week.  They released a statement that read, “If war is what the United States wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight to the end.”  To say this was an ominous statement would be far underselling the issue as many believe if shots are fired between these two superpowers that it would surely mark the beginning of a dreaded Third World War.

Trade Wars and Inflation: A Perfect Storm

Trade wars amplify inflation in ways that hit hard and fast. Often not giving citizens enough notice (if any) to prepare themselves ahead of time as they are simply thrust into deep unknown waters without a floatation device.  Restricted imports mean fewer domestic goods driving up demand and subsequently driving up prices of those goods as more dollars chase fewer tangible items we rely on every day. Retaliatory tariffs shrink export markets, leaving domestic producers with excess supply they can’t sell, forcing layoffs and higher unemployment or they are forced to hike prices to survive. Central banks, caught off guard, usually respond by printing more money to stimulate faltering economies, diluting currency value. The result? A vicious cycle of rising costs and declining purchasing power or in other words, hyperinflation.  For investors, this should be a wake-up call signalling it is time to rethink traditional assets.

Why Silver and Gold Shine in the Chaos

Enter silver and gold. These precious metals have been stores of value for millennia, and their appeal surges during inflationary trade wars. Unlike fiat currencies, which governments can devalue at will using their money printers, gold and silver have intrinsic worth tied to their scarcity and industrial uses, especially silver, a key commodity in an ever-expanding digital world.  When tariffs and retaliation destabilize markets, investors flock to these safe havens, driving up their prices.

Beyond inflation protection, silver and gold offer diversification. Stocks and bonds often tank when trade wars rattle confidence, but precious metals march to their own beat.  To finish off, we want to offer proof of the above statement, so it does not come across as an empty claim.  Dr. Copper as copper is often referred to due to its ability to diagnose our economic conditions early because of how intertwined it is in our modern world, is speaking loudly.  Copper is a first mover during inflationary times, and as of today copper is up 16.88% in just two months giving strong signals that inflation’s second wave is fast approaching.  Silver and gold provide further proof of this sentiment.  Silver is up 11.66% in the first two months of 2025 and gold is up 11.01%.  Alternatively, every major stock index currently sits in the RED on the year.  The S&P 500 is down 3.90% in two months, the tech-heavy NASDAQ is down 6.10% in two months, the Dow Jones is down 1.07% on the year, and the Russell 2000 Small Caps are down a staggering 9.24% highlighting just how important it is to be diversified into tangible assets such as silver and gold during times of heightened global tension.

During inflationary periods, cash loses its punch. A dollar today buys less tomorrow. Gold and silver, however, tend to hold or gain value as currencies weaken, which has proven to be true over the past 5 years. Gold is up 84.94% and silver is up 123.86% since 2020.  Historical data backs this: during the 1970s stagflation—marked by trade tensions and soaring oil prices—gold prices skyrocketed from $35 USD/oz to over $800 USD/oz. Silver followed suit, hitting record highs of $50 USD/oz by 1980. In a modern trade war, with supply chains snarled and inflation spiking, the same logic applies. Precious metals become a lifeboat in a sea of devalued paper.