President Donald Trump moved Monday to clarify that gold will not face U.S. tariffs, overruling a recent Customs and Border Protection (CBP) determination that had briefly rattled the global precious metals market.
“Gold will not be Tariffed!” Trump declared in a post on Truth Social, a statement that immediately cooled market fears. Gold futures, which had surged to record highs the previous week, fell sharply after the announcement, closing 2.48% lower at $3,404.70 per ounce.
How the Tariff Scare Began
The turbulence began Friday when CBP ruled that one-kilogram and 100-ounce cast gold bars imported from Switzerland were subject to the 39% tariff Trump imposed on Swiss goods earlier this month. Those bars are widely used to settle contracts on the Commodity Exchange (COMEX), the leading U.S. futures market for gold, silver, and other precious metals.
The ruling was not limited to Switzerland. According to the Swiss Precious Metal Association (SPMA), it would have applied to any country exporting these gold bars to the U.S., making them subject to whatever tariff rate Washington had levied on the country of origin. The SPMA warned that this could “negatively impact the international flow of physical gold,” potentially complicating global trade in a commodity that underpins financial stability in multiple markets.
Trade Policy Background
Trump’s August 7 announcement of broad “reciprocal tariffs” marked one of the most sweeping expansions of U.S. trade duties in decades. The measures targeted dozens of trade partners, including allies, in what the administration described as an effort to ensure the U.S. only paid tariffs equivalent to those imposed on American exports. Switzerland, a major player in global precious metals refining, was hit with a 39% duty — a rate that CBP initially sought to extend to key gold bar imports.
Had the CBP ruling stood, it could have raised costs for U.S. futures traders, investment funds, and bullion dealers, with ripple effects in global pricing. Analysts warned that higher import costs would likely have been passed on to end buyers, including jewelry makers and institutional investors, and could have created arbitrage opportunities that distorted the market.
Trump’s Reversal and Market Impact
Trump has sought to stabilize a market that had been on edge since Friday by explicitly removing gold from the tariff list. His decision comes amid growing concerns from commodity traders and international refiners about the unintended consequences of applying blanket tariffs to globally traded, fungible commodities.
For Switzerland, the reversal spares a key export sector from a sharp disruption. The country is one of the world’s largest gold refiners, processing metal mined across multiple continents. Many of those refined bars ultimately pass through Swiss facilities before reaching the U.S. market.
Still, the episode has left some in the industry uneasy, with some noting that this kind of policy whiplash makes it very hard to plan for the future. This is because even the hint of tariffs on gold can trigger price spikes and affect delivery schedules.
While gold is now exempt, Trump’s tariff regime on other Swiss exports — and on goods from numerous other nations — remains in force. This means the broader trade tensions underpinning the CBP ruling are unresolved. This has triggered the hope that other globally traded commodities might be inadvertently caught in similar customs decisions, forcing further presidential interventions.
COMEX liquidity and futures market mechanics – If the tariffs hold
COMEX futures depend on a seamless pipeline between paper markets and physical metal. If import tariffs on standard cast bars had stuck, the immediate effect would be to raise the landed cost of physical bullion used to meet delivery obligations. That would likely have produced three near-term outcomes.
First, delivery volumes could shrink. Commercial traders who arbitrage between London/Zurich refined bars and COMEX futures might pause shipments rather than absorb a sudden duty, reducing the pool of physical available to satisfy futures delivery notices and narrowing the link between futures and spot. That weakens liquidity in the front months and can widen bid-ask spreads as longs scramble to secure metal or roll contracts.
Second, margin and financing pressures would increase. Brokers and clearing members would treat the elevated cost and delivery risk as additional tail risk, prompting higher margin requirements on gold futures. Higher margins make leveraged speculative positions more expensive and can depress futures open interest and turnover, at least temporarily.
Third, price dynamics across the curve would change. A tariff that raises physical delivery costs is pro-inflationary for spot relative to nearby futures; the market shifts toward a stronger contango (where spot exceeds near futures after adjusting for funding) or unpredictable swings if delivery uncertainty spikes. Volatility would rise as hedge portfolios and producers reprice inventories and forward sales.
Implications for physically backed ETFs (GLD, IAU, others)
ETFs that back shares with allocated physical gold rely on an efficient market to create and redeem shares via authorized participants who move bullion into or out of vaults. A tariff on standard cast bars would have raised the cost of bringing bullion into U.S. vaults, thereby creating a wedge between ETF NAV and the tradable share price.
Authorized participants would face higher transaction and customs costs to deliver metal to funds. That can produce transient premiums on ETF shares (creation becomes more expensive) or discounts (redemptions are deterred), increasing tracking error versus spot. In stressed scenarios, some funds might temporarily halt creations/redemptions for operational reasons, which itself would amplify secondary-market dislocations.
Large ETFs could also face increased storage and logistics frictions. If Swiss-refined bars were deterred, funds would need to source alternative Good-Delivery bars and potentially reconfigure custody arrangements — all of which lengthen settlement times and increase operational costs, which ultimately flow through as slightly wider expense ratios or, in severe episodes, reduced liquidity in ETF secondary markets.
Central bank purchases and reserve management
Central banks acquire metal for reserves using a global network of refineries and authorized sellers — Switzerland is a central node in that network. Tariffs on Swiss-cast bars create frictions for those purchases in two ways.
Operationally, central banks that routinely settle via Zurich could face higher landed costs or prefer to reroute purchases through alternative refining hubs. That might temporarily reduce the volume of gold flowing into U.S. custody or delay deliveries into specific jurisdictions, affecting short-term reserve allocation plans.
Strategically, central banks could accelerate diversification of sourcing and storage locations. Countries might shift purchases to local suppliers, to third-party refiners not subject to the tariff, or increase direct shipments to vaults outside the U.S. That reshuffles patterns of custody and could, over time, reduce the relative share of U.S.-held bullion in international reserves — a geopolitical as well as market effect.
Secondary consequences and market behavior
Beyond those three pillars, several knock-on effects would be likely. Jewelry and industrial users could face higher input costs if tariffs feed into broader spot price rises. Dealers would expand reliance on leased metal, swaps, and OTC forwards to bridge physical shortages, possibly raising counterparty and basis risk.
Market participants would seek arbitrage, creating cross-border flows where duties are lowest, but those flows bring compliance and KYC risks, increasing regulatory scrutiny. Smuggling and misclassification concerns would attract enforcement attention and further disrupt legal supply channels.
