Trump's tariffs force central banks to boost gold reserves amid US policy uncertainty, imperiling emerging markets and poor nations economically.
Analysis by Analysts: Trump's Policies Will Spur Increased Gold Purchases by Central Banks
In light of the risks posed by President Trump's tariff policies, central banks around the world are expected to continue buying gold. This move is intended to further diversify foreign exchange reserves and reduce dependence on the US dollar, thereby contributing to the remarkable surge in gold prices.
The World Gold Council (WGC) estimates that in the final quarter of 2024—following a projected Trump victory in the US election—central bank gold purchases will increase by 54% year-over-year, reaching 333 tonnes.
Currently, emerging market central banks hold gold assets that make up about 10% of their total reserves. Michael Widmer, a commodities strategist at a major US bank, believes that these banks should ideally allocate 30% of their assets to gold. This shift would require an additional 11,000 tonnes of gold reserves. With the continuing uncertainty in US economic policy, this trend is expected to persist in the coming years.
From the perspective of central banks, the uncertainty surrounding US policies is reducing the appeal of including US Treasury bonds in their portfolios while boosting the drive to de-dollarize.
For the World's Poorest Countries: A "Disaster" Under Trump's Tariffs
President Donald Trump’s latest round of reciprocal tariffs is expected to hit some of the poorest nations hardest, particularly those with labor-intensive export industries. Among the tariffs announced on Wednesday, Cambodia faces a rate of 49%—the highest in Asia. Other nations include Bangladesh at 37%, Laos at 48%, and Lesotho at 50%.
"Look at Cambodia—97%," Trump remarked at the White House, referring to the severe impact on the Southeast Asian country, which earned significant revenue from trade with the United States. According to World Bank data, the average daily income in Cambodia is about $6.65—less than one-fifth of the global average.
As the US withdraws aid to some of the world’s poorest nations, this trade action could further damage their economies. For instance, Myanmar is already feeling the repercussions of aid coming to nothing.
“This is truly a disaster,” said Deborah Elms, trade policy director at the Hinrich Foundation. “A near-50% tariff imposed overnight is something these countries cannot cope with.” She added that many of these nations, previously granted duty-free access to the US market as least-developed countries, might now shift their trade focus to Europe, Japan, and Australia.
Trump’s Policies Spur Further Gold Purchases by Central Banks
Due to the risks associated with President Trump’s policies, central banks are expected to continue purchasing gold this year to diversify their reserves further and reduce reliance on the US dollar. This is set to propel the astonishing rise in gold prices even further.
The 2022 Russian invasion of Ukraine was the first catalyst for increased central bank gold purchases, with annual acquisitions surpassing 1000 tonnes—double the average of the previous decade. On Thursday, the spot price of gold reached a record $3167.57 per troy ounce, rising 19% since early 2025 and 71% since the end of 2022.
The WGC projects that in the final quarter of 2024, when Trump is expected to win the US election, central banks’ gold purchases will surge by 54% year-over-year to 333 tonnes.
Michael Widmer of a major US bank commented, “Emerging market central banks currently have about 10% of their assets in gold. They should really be aiming for 30%.” He further noted that achieving this target would require an additional 11,000 tonnes of gold reserves and emphasized that US economic policy uncertainty is likely to persist in the coming years. In his view, this uncertainty not only dampens the appeal of US Treasuries but also fuels the momentum behind de-dollarization.
Previously, US Treasuries and the dollars needed for their purchase had vied with gold for safe-haven status. Trump’s tariff policies—combined with his stance on the Ukraine conflict and skepticism toward longstanding alliances with Europe—are disrupting the global order. One source involved in selling gold to central banks commented, “Central banks with lower gold reserves will seek to boost them. This year might witness the highest demand from central banks in decades.”
As companies pass on tariffs to consumers to protect profit margins and workers push for higher wages, concerns about spiraling inflation have also reinforced gold’s role as a store of value.
A recent report by analysts at Macquarie stated, “We believe that the current strength in gold prices and our expectation that this trend will continue are primarily driven by investors and official institutions willing to pay a premium for an asset free from credit and counterparty risks.” Central banks—following jewelry and investment as the third-largest buyer of gold—account for 23% of global gold consumption. Typically, they buy more when prices drop and scale back when prices rise. However, with expectations of steady price increases, delays in purchases appear unlikely.
There is, however, a possibility that central banks might choose not to disclose their purchases, especially since Trump has threatened to levy tariffs on countries perceived as aggressively de-dollarizing.
Official data reported to the International Monetary Fund currently reflects only 34% of the total central bank gold demand estimated by the WGC for 2024. According to the WGC, between January and February, central banks reported a net increase of 44 tonnes in their gold reserves—with Poland and China being the largest buyers.
Analyst Perspectives on Tariff Impacts Across Regions
Swiss Watchmakers and Medium-Sized Industrial Firms
Analysts from Vontobel noted that among Swiss exporters, luxury goods companies, watch manufacturers, and medium-sized industrial firms seem to be the most vulnerable to a proposed 31% tariff on Swiss imports. Vontobel mentioned that exports in the pharmaceutical sector and some semiconductor products might enjoy partial tariff exemptions. They also observed that large companies with US production facilities could even benefit from the new measures. One analyst commented, “Companies that focus solely on the domestic market are relatively safe harbors.”
United Kingdom’s Relatively Light Tariff Impact
Analysts Joachim Clement and Susanna Cruz from Panmure Liberum reported that, compared to other major economies, the UK has largely escaped severe tariff impacts. Under the current agreement, UK goods face a combined tariff of only 10%—a rate significantly lower than that imposed on other nations. They suggested that the UK might even leverage concessions in other areas to avoid these tariffs, thus having only a minimal drag on GDP growth. “If the UK government can negotiate substantial tariff reductions from the US, it could even become a prime candidate for reconfiguring supply chains,” they added.
Japan Faces Economic Slowdown Risks
Economists warn that President Trump’s comprehensive tariff measures have cast uncertainty over the Bank of Japan’s policy normalization path, given the risk of an economic recession. Shigeto Nagai, former head of the international department at the Bank of Japan and current head at the Oxford Economics Institute in Japan, remarked, “This exceeds our worst-case scenario expectations.” He noted that Japan’s rate-hiking cycle might be paused.
Trump announced on Wednesday that from next week, Japan will face a 24% comprehensive tariff, with an additional 25% tariff on imported automobiles coming into effect shortly after midnight US time on Thursday. Economists believe these measures will significantly impact Japan’s economy. Nagai predicts that Japan will enter a mild contraction in the third quarter—potentially two consecutive quarters of shrinkage, which fits the textbook definition of a recession. While Japan continues to seek tariff exemptions, a quick resolution seems unlikely.
“Unless tariffs are reduced soon, the next rate hike might be postponed until after September,” commented Takeshi Yamaguchi, Chief Japanese Economist at Morgan Stanley Mitsubishi UFJ Securities, in a report released on Thursday. Prior to the tariff announcements, market attention had focused on whether the Bank of Japan might hike rates as early as May 1 at its upcoming policy meeting. In a recent interview, former BOJ policy board member Seiji Adachi suggested that rate hikes might be possible in May, given the rising inflation. The Bank of Japan has repeatedly stated that if the economy moves toward its target—maintaining an inflation rate sustainably around 2%—it will raise its benchmark rate from 0.5%. However, recent surveys indicate that most economists expect a rate hike in June or July, and current market indicators have significantly reduced the likelihood of an imminent increase.