Global Silver Market Faces Uncertainty Amid Trade War Tensions

The global silver market is experiencing increasing stress as trade-war concerns unsettle investors, with key indicators flashing warnings, substantial movements of the metal between trading hubs, and the potential for months of disruption. A sharp rise in the cost of borrowing silver has emerged as the latest sign of concern, fueled by anxiety over the possibility of further tariffs from US President Donald Trump. This has triggered a rush to ship silver to the US in an attempt to take advantage of higher prices in New York, which could lead to a squeeze in London.

Precious metals, including silver and gold, have been significantly impacted this year as Trump challenges the global trade system. These tensions have driven demand for safe-haven assets and caused pricing dislocations between major markets. While spot silver has gained approximately 17% this year, making it one of the top-performing commodities, silver futures in New York have outperformed even that.

On a physical level, the looming tariff concerns—particularly those involving Canada and Mexico—have led to massive quantities of both gold and silver being moved from London to US vaults. Due to their size and density, gold is typically air-freighted, whereas silver usually travels by ship, which takes longer.

The situation is compounded by rising lease rates, the cost of borrowing silver for short-term use, which have spiked in recent weeks. One-month silver lease rates surged above 6% this month, following a significant rise in February. This increase reflects fears over rapidly dwindling silver stockpiles in London, where holdings hit a record low last month. Moreover, much of what remains is unavailable, tied up in exchange-traded products.

Cao Shanshan, an analyst at COFCO Futures Co., expects lease rates to remain elevated for the next two to three months. “With the UK-to-US transfer underway, silver is bulkier than gold, so its transfer will likely take longer,” Shanshan noted.

US exchange-reported totals reflect the growing turmoil. Silver inventories on the Comex exchange have surged to record highs, climbing 40% this quarter alone—the largest rise since data began being recorded in 1992. While New York continues to attract silver, concerns are mounting that this influx could reverse if silver stockpiles in London face a shortage.

BMO Capital Markets analyst George Heppel pointed out that any potential “silver squeeze” could be prolonged by slower trade flows. “It would take time for silver stockpiles to flow from the US back to London, which could contribute to extended disruptions,” he said.

The US imports around 70% of its silver from Canada and Mexico, both of which have been heavily affected by the Trump administration’s trade policies. In response to tariffs, Canada announced counter tariffs on US goods, including silver, and the US has signaled plans for additional tariffs on April 2. Citigroup analysts, including Max Layton, warned that the market may be underestimating the potential impact of these new tariffs. “There is substantial potential upside should reciprocal tariffs be implemented over the next six months,” they stated, adding that silver is unlikely to be exempted from these measures.

TD Securities echoed similar concerns. “If reciprocal tariffs are truly like-for-like, retaliatory tariffs on Canadian silver would be expected, which makes up about 20% of US imports,” said Daniel Ghali, senior commodity strategist at TD. “Even if the disruptions were to resolve overnight, we can’t return to the previous normal because of the uncertainty surrounding future trade actions.”

As tensions over trade continue to escalate, the global silver market faces an uncertain future with the potential for prolonged disruptions, creating an unpredictable environment for investors and traders alike.