Tariffs have been around for hundreds of years, originally designed to promote trade and raise revenue for the federal government. Throughout their history, tariffs have been controversial to economists, governments, and customers. This is because they affect the economy, as well as other sectors like the gold market. Here, Noble Gold Investments discusses the history of tariffs in the United States and how they typically affect the economy and the gold investing industry.
Exploring Tariffs and Their History
To understand the effect tariffs can have on the economy, you first need to understand what tariffs are. Tariffs are taxes charged on goods that are imported from other countries. The companies that bring foreign goods into the country pay the tax to the government. Tariffs help governments generate revenue, control the flow of goods, and protect local industries. They also impact the prices that customers pay and affect international trade policies. When tariffs are enacted, they generally result in paying higher prices for imported items, which can increase the use of cheaper domestic products.
Before the federal income tax was created in 1913, tariffs were a main revenue source for the U.S. government. In fact, tariffs accounted for 90% of federal revenue from 1790 to 1860. Throughout U.S. history, they have also been utilized as economic leverage between nations during trade wars. In the early 20th century, the Smoot-Hawley Tariff Act significantly increased tariffs on thousands of U.S. imports, affecting international trade and resulting in retaliatory tariffs.
The popularity of tariffs as an economic policy decreased after World War II as global trade increased, as the government required major revenue streams to pay for its operations. Since then, the U.S. has generally charged lower tariffs on goods than other countries. However, the U.S. government has started to retreat from promoting global free trade and lower tariffs. President Donald Trump has recently announced higher tariff rates on imported goods from Mexico, Canada, and China. These new tariffs have been controversial, as they may affect the economy in several ways.
How Do Tariffs Affect the Economy?
Tariffs affect the economy in many ways, especially higher tariffs like the ones President Trump has enacted. Some effects that tariffs have on the U.S. economy include:
- Increased inflation: As a result of higher prices on imports, the U.S. rate of inflation could increase from 2.9% to as high as 4%.
- Higher prices for consumers: American companies must pay tariffs on their imports, with the money going to the U.S. Treasury. These companies often pass their higher costs on to their customers via higher consumer prices.
- Trade war: Other countries, like the Chinese and Canadian governments, often retaliate against higher tariffs by placing their own tariffs on U.S. exports. These actions can affect global markets and supply chains and cause economic uncertainty.
- Weakened economic growth: Slower growth in the economy is an effect of tariffs between the U.S. and other countries, which is leading to “stagflation.” The tariffs also caused a plunge in the stock market, leaving many people worried about the volatility.
- Increased tax revenues: By increasing tariffs on trade partners like Canada, Mexico, and China, the U.S. could increase total U.S. tariff revenues by around $300 billion.
As you can see, tariffs, inflation rates, and other economic indicators have political significance that affect all U.S. citizens.
How Do Tariffs Affect The Gold Market?
Tariffs have been talked about a lot lately, so it makes sense that investors in gold, silver, and other precious metals may be wondering about their effects on the industry. They include:
Higher Demand
As mentioned above, Trump’s tariffs may increase inflation and therefore affect the value of currency. When this happens, many investors look to invest in stable physical assets like gold, silver, and other precious metals. Investing in gold offers a good hedge against inflation because its prices typically move opposite the prices of paper assets. This makes the demand for precious metals higher.
Market Disruptions
Tariffs can lead to trade tensions and even trade wars, which can disrupt the market. This is especially true for metals like silver, as the U.S. relies heavily on Mexico for importing silver. If tariffs affect the supply and trade with Mexico, the silver industry can see major effects on availability and prices.
Higher Prices
As investors are looking to diversify their portfolios by buying gold and silver, the prices of these precious metals can also increase. Historically, when tariffs have been introduced, gold tends to gain from increased buying interest. Although this isn’t true for all metals, precious metals often have an increased price during volatile periods. After the enactment of the Trump administration’s tariff policies, the price of gold has climbed to a record high as more people look for a safe and stable asset.
Both U.S. fiscal policies and geopolitical events have an impact on precious metals, which in turn affects investor behavior. However, many investors are still looking to invest in precious metals and reap the benefits of these assets.
Precious Metals from Noble Gold Investments
At Noble Gold Investments, we offer our clients 20+ years of expertise in precious metals, including gold, silver, platinum, and palladium. We help you get started with investing in precious metals by offering a straightforward process and continuous support. You can purchase your metals directly from us, as we carry a variety of precious metals and bullion for you to invest in. They include gold coins, silver coins, platinum coins, palladium coins, and rare coins. We also offer bars, ingots, and more.
If you’re looking to protect your retirement account against inflation, opening a self-directed gold IRA (Individual Retirement Arrangement) is a smart choice. We offer these accounts, as well as silver IRAs and precious metal IRAs that make diversifying your portfolio easy. These investment accounts help you take advantage of the value of tangible assets, acting as a safe haven against inflation and economic collapse.
At Noble Gold, we also pride ourselves on providing unbeatable customer service, transparent pricing, and support throughout the process. Our commitment to our customers is evident in the thousands of positive reviews and ratings we have received from them.
Explore Precious Metal IRAs from Noble Gold Investments
If you’re looking for a safe investment during times of economic uncertainty, investing in gold or other precious metals is a great idea. Open a precious metals IRA through Noble Gold Investments to create a stable financial future, even during unstable economic activity, changing inflation rates, and higher tariffs. To start planning for your future, get started now by speaking with a member of the Noble Gold team.
