How Trump’s Gold Tariffs Created a $100 NY-London Basis Gap

In late July 2025, a Swiss gold refiner did something that captures the entire problem in a single act. It wrote to US Customs and Border Protection asking whether standard one-kilogram gold bars, a product the market had long treated as duty-free, were actually subject to import tariffs.

The answer, confirmed in a CBP letter dated 8 August 2025, was yes. The rate was 39%. According to the Los Angeles Times, traders who had assumed these bars were exempt were “stunned.”

What followed was not a market footnote. Within days, New York gold futures traded at a $100 premium over London spot, a spread that signals localized scarcity of US-deliverable bullion. Dealers began rerouting million-dollar shipments away from the US border rather than risk uncertain tariff exposure.

The question for anyone tracking physical gold is whether these disruptions are temporary friction or the early signs of a structural squeeze in US supply. This piece traces the tariff sequence that caused the chaos, examines what dealers are actually doing, weighs the case for and against a genuine shortage, and explains what the retail sell-back environment adds to the picture. The reality is messier than either the bulls or the sceptics are admitting.

From exempt to 39%: how the tariff classification chaos unfolded

The operational damage from Trump’s gold tariffs did not come from any single rate. It came from a sequence of reversals, each one overturning what the market had just accepted as settled.

It began in April. On 5 April 2025, a 10% global import tariff took effect, with exemptions carved out under HTSUS Revision 10. Non-monetary gold bullion in unwrought form (HTS 7108.12.10.00) was generally exempt. Collectible coins, semi-manufactured gold, and miscellaneous precious-metal articles stayed taxed. Dealers adjusted, favouring exempt bullion and shifting numismatic products to other channels.

Then came the shock. On 31 July 2025, CBP reclassified one-kilogram and 100-ounce gold bars into HTS code 7108.13.5500, making them liable for a 39% duty. These are the standard formats the market had assumed were effectively exempt. The reclassification reversed that assumption overnight.

The LBMA’s official statement on the CBP ruling highlights a direct discrepancy between the July reclassification and the US government’s earlier stated intention to exempt bullion from tariffs, lending institutional weight to the market’s contention that the 39% duty was inconsistent with prior policy signals.

According to the Los Angeles Times (8 August 2025), CBP confirmed the 39% duty in a letter to a Swiss refiner seeking clarification, a decision that “stunned traders who had assumed [gold bars] would be exempt” and carried sweeping implications for the smooth functioning of the US futures contract.

The Swiss-US gold tariff dispute traces the full diplomatic and trade context behind CBP’s August letter, covering why Switzerland became the focal point of US enforcement attention and how bilateral negotiations shaped the exemption architecture that followed.

A partial fix arrived a month later. On 5 September 2025, an executive order established a 0% tariff for qualifying bullion from “aligned partner” countries, effective 8 September. It named specific eligible codes, including 7108.11.00, 7108.12.50, 7108.13.10, 7108.13.55, 7108.13.70, and monetary gold under 7108.20.00.

That looked like resolution. It was not. The order layered new HTS-code and country-of-origin conditions on top of a classification regime that had already proven unstable, meaning compliance teams still had to verify origin and code for every shipment.

The legal ground then shifted again. In February 2026, the Supreme Court struck down Trump’s flagship import tariffs, after which he announced replacement temporary tariffs of 10%, then 15%. Yale University research cited an effective tariff rate of 16.9% for 2025. A January 2026 World Gold Council note confirmed the White House had clarified that gold imported for investment purposes is exempt from tariffs imposed under the International Emergency Economic Powers Act (IEEPA), though the Atlantic Council flagged open questions about how durable that regime would prove.

The takeaway for investors is that tariff risk on bullion is not a resolved question. Each new ruling or executive order resets the cost calculus for the dealers and logistics providers who move metal into the US market.

A million-dollar shipment turned back: what dealers are actually doing

The clearest picture of this disruption comes not from a price chart but from a single shipment that never crossed the border.

A consignment of Canadian gold valued at over $1 million was halted just before the US border and redirected to a Canadian wholesaler. The dealer, Michael Patcheon of Canam Bullion, made the call with logistics provider Brinks after weighing the numbers. Selling domestically in Canada at a lower price meant an estimated net loss of 6-7%. That was judged preferable to a then-applicable tariff exposure of 17.5% on non-Canadian gold entering the US.

The calculus every cross-border dealer is now running breaks into three distinct cost components:

• Rerouting loss: a known, fixed 6-7% discount from selling into an alternative domestic market.
• Tariff exposure: a headline 17.5% liability had the metal crossed, far larger than the rerouting loss.
• Classification uncertainty: the risk that CBP reclassifies the product mid-transit, making the 17.5% figure unpredictable rather than a fixed ceiling.

A dealer accepting a certain 6-7% loss to avoid a possible 17.5% hit tells you something important. The uncertainty around classification is now being priced as a cost in its own right, separate from and on top of whatever rate is actually posted.

Michael Patcheon of Canam Bullion projects that reduced cross-border precious metals flow will, over time, generate a physical metals liquidity shortage for US investors.

What institutions say versus what dealers do

There is a visible gap between the institutional view and the operational one. When the September 0% order landed, the London Bullion Market Association (LBMA) described it via Reuters as a “welcome development,” reflecting confidence that once exempt HTS codes are clearly listed, physical trade normalises quickly.

That optimism sits in tension with the dealer experience on the ground. Back in April 2025, the trade publication Greysheet had already urged dealers to review HTSUS Revision 10 closely, warning that the constant need to re-interpret HTS codes was itself an operational strain, not a one-off adjustment.

For investors sourcing physical gold domestically, this matters directly. Rerouting decisions reduce the volume of metal flowing into US distribution channels, and you sit downstream of those logistics calls. Tighter availability and higher dealer premiums are the practical consequence.

Is a physical supply squeeze actually coming? The case for and against

The strongest evidence for a genuine squeeze is quantitative, and it appeared in August 2025.

That month, New York gold futures hit $3,534 per ounce, a $100 premium over London spot at $3,434. A basis spread that wide does not open by accident. It reflects the market pricing in localized scarcity of US-deliverable bullion relative to abundant global supply.

The widening basis between New York futures and London spot is precisely the spread that makes the distinction between paper gold vs physical gold operationally consequential; a futures position settles against deliverable bar inventory, whereas a spot or ETF position does not, meaning the two instruments diverge in value exactly when physical scarcity bites.

The structural logic reinforces the signal. One-kilogram and 100-ounce bars are the primary formats for COMEX deliverability and institutional settlement. Pulling them into a 39% duty regime raises the risk that deliverable bar stocks become harder to replenish from Swiss and other foreign refineries. Sustained rerouting, in theory, shrinks the pool of bars available for domestic settlement.

The counter-case is equally grounded, and it deserves equal weight:

• Exempt HTS codes remained available under both the April 2025 structure and the September 2025 order, letting dealers import compliant unwrought bullion.
• The LBMA’s position is that refiners and banks can reroute production toward qualifying partners and codes, restoring flows for standard bars.
• The WGC’s January 2026 note implies core investment bullion flows can continue under the IEEPA exemption umbrella even with general tariffs elevated.
• Arbitrage logic is deep and reliable. Global gold supply is vast, and price-driven arbitrage pushes metal toward the highest-priced market. Sustained New York premiums should attract supply unless legal barriers become far more extreme.

What the NY-London spread is telling you

The $100 spread is the clearest real-time signal available, but you should read it precisely. It is the market pricing in the probability of a shortage before one has fully materialised. Treat it as an early-warning indicator, not confirmation that the squeeze has already arrived.

A genuine, durable squeeze would require three conditions to hold at once. This is the monitoring checklist:

1. High tariffs on standard bar formats, keeping COMEX-deliverable bars like 1-kg and 100-oz bars under duty.
2. Persistent legal uncertainty about which exemptions actually apply, which the Atlantic Council flags as an open question given IEEPA’s contested durability.
3. Logistical or banking barriers severe enough to stop arbitrage from closing the basis spread.

Temporary classification shocks and basis spikes are usually absorbed over time through rerouting and contract repricing. Whether the September exemptions and the IEEPA carve-out have truly normalised flows, or whether another reclassification episode is coming, is the central open question. Monitor the NY-London spread, the status of exempt codes, and the legal durability of the investment-gold exemption, and you will see a real squeeze forming before the headlines confirm it.

Record sell-backs, low buyers, and what the retail picture adds to the supply story

Here is the apparent contradiction. If retail customers are dumping gold back to dealers in record volumes, why worry about a shortage at all?

The current retail environment, according to Canam Bullion’s Patcheon, shows buyer activity at its lowest level in more than a year alongside record sell-back volumes. Two drivers sit behind the selling:

• Immediate need for cash, reflecting financial stress among consumers.
• Concern about further price declines, reflecting eroding confidence in precious metals prices.

That surface of abundant supply does not cancel out the cross-border flow problem, because the two operate on different parts of the chain. Retail sell-backs replenish a dealer’s secondary inventory, the second-hand bars and coins already inside the country. Primary bullion flows from international refineries are what sustain the supply of new, standardised, institution-grade bars. Rerouting hits the primary channel. Sell-backs top up the secondary one. They do not substitute for each other.

Physical gold availability in the primary dealer pipeline is a separate variable from spot price, and the divergence between the two is exactly what the current tariff environment is making structurally visible in US distribution channels.

Patcheon frames the low-buying period as cyclical rather than permanent, and this reading should be attributed to him rather than treated as consensus. His operational view, drawn from work in precious metals since 2015, is that suppressed accumulation periods historically give way to buying surges, typically coinciding with price rallies, with recovery expected once interest rates fall and monetary stimulus resumes.

Patcheon expects the physical liquidity shortage to compound when a buying surge eventually arrives, framing it as a forward-looking risk rather than a present condition.

The implication for anyone holding physical gold is specific. When confidence returns and buying picks up, the dealer replenishment pipeline will be under more strain than in previous cycles, because primary inflows have already thinned. A buying surge into a supply-constrained market produces premium spikes that erode the value of an otherwise well-timed entry.

What investors should watch as the tariff regime continues to evolve

The analytical work is done. What remains is knowing which three signals actually tell you whether friction is turning into shortage.

1. The NY-London gold basis spread. This is the primary real-time gauge of physical supply stress in the US market. The $100 gap in August 2025 showed what stress looks like. A spread that widens and stays wide means US-deliverable bullion is genuinely scarce, not just briefly disrupted. A spread that closes tells you arbitrage is doing its job.
2. The legal durability of the IEEPA investment-gold exemption. This is the most consequential regulatory variable. The WGC framed the exemption as the current protection after a period of “considerable uncertainty,” but the Atlantic Council notes the February 2026 Supreme Court ruling leaves open questions about what legal instruments Trump may use next. If the exemption’s legal footing weakens, the core protection for investment flows weakens with it.
3. HTS code reclassification risk. Even with exemptions in place, the 31 July 2025 reclassification proved CBP can change the treatment of standard bar formats with minimal warning. Watch for any signal that standard 1-kg or 100-oz bars are being re-examined. That precedent is the reason no current exemption should be read as permanent.

Treating the September 2025 exemption order as a permanent resolution repeats the exact assumption traders made before the July reclassification caught them out. Physical gold decisions are never made in isolation from logistics and regulation. These three variables give you a framework for timing sourcing decisions and assessing dealer premium risk in a tariff-volatile environment.

Gold import tariff regimes outside the US reveal a recurring pattern: initial rate changes produce sharp rerouting, compliance strain, and secondary-market distortions before arbitrage or policy adjustment restores partial equilibrium, a historical template that informs how long the current US disruption cycle is likely to run.

Making a physical gold decision in a tariff-volatile market

The disruption is real and documented. A $100 basis spread, a rerouted million-dollar shipment, and a 39% duty on standard bars are not projections. They happened. What separates temporary friction from structural shortage now depends on three variables you can actually monitor.

The retail and wholesale pictures fit together rather than contradicting each other. Record sell-backs create a surface appearance of ample supply, but the pipeline that matters for long-run availability runs from international refineries to US dealers, and that pipeline is the one rerouting has thinned.

The conditions for a genuine squeeze remain latent rather than eliminated. That is not a prediction, it is a posture. Investors who understand the mechanism are better positioned to act when the variables shift, in whichever direction they move.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions. Past performance does not guarantee future results, and forward-looking statements are speculative and subject to change based on market and regulatory developments.