What Happened To Gold The Last Time The US Used Steel Tariffs?

The Trump administration has pulled the trigger on trade wars, but his targets come as a big surprise. While only months ago everyone expected the U.S. and China to go head-to-head over trade deficits, the U.S. has turned on its allies instead, removing tariff exemptions given to Canada, Mexico, and the E.U., prompting retaliations all around. On the list of targeted U.S. exports that will now be more expensive for American companies to export are steel and aluminum, whisky (including Kentucky Bourbon), coffee, and a long list of agricultural products.

Steel tariffs aren’t new. In fact, President George W. Bush used them in 2002 to put some blood back into the U.S. steel industry. He slapped an 8-30% tariff on steel from around the world. That time, there were exemptions for Canada and Mexico, the U.S.’s NAFTA partners, but not so for the E.U., China, or South Korea.

The tariffs lasted 21 months until a successful E.U. complaint with the WTO led to the Bush administration lifting the tariffs, but not before some damage had been done to the U.S. economy. Because of skyrocketing input costs for manufacturers, some 200,000 Americans lost their jobs, while the steel industry that benefited only employed 197,000 in total.

This time, losses in auto manufacturing and construction could be even worse. Canada and Mexico, the #1 and #4 sources for steel in U.S. manufacturing, collectively account for about 25% of all steel imports into the U.S. Most manufacturers will simply wind up paying more for steel, because the U.S. simply doesn’t produce enough steel to meet domestic demand, and because manufacturers love consistency. They know the steel they buy works with their tools.

Where does gold come into the picture? The last time steel tariffs were imposed, it kicked off big moves for gold and silver. Gold gained 25% in 2002 while the U.S. dollar began a 5-year plunge that would bottom out in 2007. Gold continued on a bull run that hadn’t been seen since 1980. Between 2002 and 2011, gold prices increased by a factor of 6.5 at its peak. A lot of factors went into gold’s rapid appreciation, including the 2008 financial crisis, but trouble with steel tariffs in 2002-2003 was almost certainly among those factors.

Gold bugs can welcome these tariffs as good news for their portfolios. With gold coming off a dip in prices, head to an online dealer like Silver Gold Bull to take advantage of low premiums. It’s a great time to increase your position, as these tariffs will soon impact job numbers and the U.S. dollar. That’s when you’ll see gold prices start to rise. If you’re going to be buying gold in the near future, don’t forget to take advantage of free shipping deals from a company like Silver Gold Bull, which provides free shipping on orders over $500. The future of gold prices looks bright as uncertainty enters long-stable economic relationships between the U.S. and Canada. Check out gold coins and gold bars at Silver Gold Bull and wait to see what happens. The gold comeback looks like it’s on.