What Will Happen to Gold Prices if The U.S. Pulls out of TPP and NAFTA?

President Trump has already started to implement plans to pull the United States out of the Trans-Pacific Partnership (TPP). He also wants the United States to withdraw from the North American Free Trade Agreement (NAFTA).

For perspective, NAFTA virtually eliminates tariffs on goods imported between the U.S., Canada and Mexico. The TPP is different. It would only reduce tariffs on goods traded between those three countries, but would add Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

 Photo of President Donald J. Trump, courtesy of Whitehouse(dot)gov.

President Trump wants to eliminate both agreements to keep manufacturing jobs in America. His reasoning is that if goods can be manufactured in countries where labor is cheap and then imported into the U.S. without paying tariffs (or paying low tariffs), companies will decide to manufacture abroad. Tariffs – and steep ones, he seems to believe – will encourage companies to keep jobs here. It’s a good theory. We’ll see how it works out.

What Would Trade Agreement Pullouts Mean for Gold Prices?

If he carries through with his plans and withdraws our country from both trade agreements, what will that mean for the price of gold, both in the U.S. and internationally?

In truth, it is a bit difficult to predict, but here are some factors that could affect the price of gold.

Lots of Gold Is Used to Make the Products that Would Be Affected

Small amounts of gold are used to manufacture electrical devices of all kinds, including cellphones, flat screen televisions, solar panels, computers and tablets, and more. Gold is also used in automotive and aerospace manufacturing.

So what would that mean for the price of gold if tariffs are imposed or made bigger when those products are imported to the U.S.? The answer to that question is complex. One example? When gold is imported to Mexico or Malaysia to make products that are then imported into the U.S., import tariffs (if any) on the gold are paid in those countries, not in the United States. U.S. tariffs would be paid on the manufactured goods imported, not the gold per se. Another way to look at this is that the U.S. would still be paying tariffs for importing gold, only those tariffs would be “hidden” in the tariffs paid for importing the products they contain. If this scenario develops, the impact could be small on the price of gold in the U.S.

The following consideration, however, could have a larger impact on gold prices . . .

If More Gold Must be Imported into the U.S. to Be Used in Manufacturing, Gold Prices Could Rise

Again, this issue is complicated. If the manufacturing of cellphones decreases in Asia and moves to the U.S., for example, tariffs will need to be paid here on gold that is imported to make them. That would ramp up demand for gold that can already be found in the U.S., causing prices to rise. It could then be a very good time to own gold, or to recycle the gold you already own with a qualified gold refiner like Specialty Metals Smelters and Refiners.

Watch the Trends and Profit

It is difficult to predict how the fall of trade agreements would affect gold prices. However, it is easy to keep your eye on daily trading prices, which are updated on our website.

Do you have questions about what to do with your gold? Give our gold recycling specialists a call at 800-426-2344, tell us about your recyclables, and let us help you profit from them.

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