Unintended consequences of Trump’s tariffs: ‘Drill baby drill’ fizzles, price of gold soars

“Drill baby drill” was a favorite mantra of candidate Donald Trump last year. And following his inauguration, the White House proclaimed Trump’s “energy dominance” policies were “unleashing American energy.” 

Trump’s belief was/is that increased energy production, especially oil, or “liquid gold,” as Trump calls it, would lead to lower gas prices, in turn contributing to lower prices for other goods.

Occasional short-term spikes notwithstanding, the price of gas has held more or less steady for several months, and is currently roughly about the same as it was on Election Day and Inauguration Day. The price of gas is not projected to rise notably for the rest of this year and into the next. 

But that’s not because of “drill baby drill” or “energy dominance” policies. It’s because the impact of Trump’s tariffs will mean “less oil demand growth,” according to a U.S. Energy Information Administration outlook published earlier this month.

Unfortunately, the same trade policies that will likely keep gas prices in check are also expected to inflate prices of many other goods and services.

Trump’s tariffs and their accompanying economic uncertainty and predictions of a slowing or shrinking economy have already raised one price substantially: The price of an ounce of gold.

Nevada mines by far more gold than any other state. If Nevada were a country, it would be the world’s fifth largest producer of gold, after China, Russia, Australia and Canada.

Gold has long been viewed by investors as a safe haven when economic disturbances or their likelihood rattle markets. Gold is seen by many as a strong hedge against inflation, as its value increases while the purchasing power of a dollar decreases.

Actual gold did not garner nearly as much attention as “liquid gold” from Trump during his presidential campaign. But his policies, albeit unintentionally, have had a tremendous impact on the commodity. In mid-March the price of an ounce of gold exceeded $3,000 for the first time ever.

As of late Tuesday, the price was $3,327.

Gold prices also spiked during the economic upheaval and uncertainty of the pandemic. Nevada state legislators, during a crisis special session wracked with budget cutting, took advantage of the gold mining industry’s countercyclical financial performance, and passed legislation by which the mining industry paid a portion of its primary mining tax a year in advance. 

During the Great Recession, another period when the price of gold rose sharply, the industry similarly pre-paid taxes as state lawmakers were struggling to cope with budget cuts.

Amid predictions of a recession and already-sagging economic indicators, state lawmakers and the governor are facing the prospects of potential budget cuts again this year.