Silver: The Undervalued Dual-Function Asset in a Tariff-Driven World

In a global trade environment increasingly defined by protectionism and geopolitical uncertainty, investors are seeking assets that offer both industrial utility and safe-haven appeal. Silver, long overshadowed by gold in the precious metals arena, is emerging as a compelling candidate for strategic allocation. Its unique duality-as a critical industrial metal and a store of value-positions it to outperform in a world where tariffs, supply bottlenecks, and green technology demand are reshaping markets.

The Industrial Engine: Green Tech and AI Fuel Silver's Growth

Silver's industrial demand is surging, driven by its indispensable role in green technologies and artificial intelligence (AI) infrastructure. According to a report by the Silver Institute, solar photovoltaic (PV) applications alone now account for 29% of global silver consumption, up from 11% in 2014. This growth is accelerating as nations like the European Union target 700 gigawatts of solar capacity by 2030. Meanwhile, electric vehicles (EVs) require 25–50 grams of silver per unit, nearly double the amount used in internal combustion engines. With global automotive silver demand projected to grow at 3.4% annually through 2031, EVs are set to overtake traditional vehicles as the largest industrial consumer of silver by 2027.

The AI and data center sector is another catalyst. Global IT power capacity has expanded 5,252% since 2000, reaching 50 gigawatts in 2025. Silver's conductivity and durability make it vital for advanced computing hardware and cloud infrastructure. As AI applications proliferate in media production, design, and simulation, demand for data centers-and thus silver-will only intensify.

Critical Mineral Status and Supply Bottlenecks: A Strategic Headwind

The U.S. government's designation of silver as a critical mineral in its 2025 List of Critical Minerals underscores its strategic importance. This classification recognizes silver's role in national security, defense systems, and the energy transition. However, the U.S. imports 64% of its silver supply, with over 80% of global production occurring as a byproduct of other metals highlighting supply chain vulnerabilities. This creates supply chain vulnerabilities, particularly as China dominates refining and processing capacities.

Government policies are now prioritizing domestic supply chain resilience. Initiatives include streamlined permitting for mining projects, tax incentives for production, and potential stockpiling efforts. These measures aim to reduce reliance on foreign adversaries and address the inherent difficulty of scaling silver production in response to demand spikes.

Protectionist Trade Environment: Silver's Safe-Haven Edge

In a tariff-driven world, silver's dual-function status gives it a distinct advantage over gold. While gold has maintained a steady upward trend-posting a 40% year-to-date gain-it has underperformed relative to silver amid U.S. tariff clarity. For instance, President Trump's September 2025 executive order exempting gold bars from import duties for allied nations stabilized gold markets but also reduced its speculative allure. Silver, however, has surged to 13-year highs ($38/oz), driven by both industrial demand and its role as a hedge against protectionist policies.

Tariffs and trade tensions amplify silver's appeal. Unlike gold, which is primarily a store of value, silver's price is directly tied to supply-demand imbalances in sectors like solar and EVs. As governments impose tariffs on critical minerals and infrastructure projects, silver's industrial indispensability ensures sustained demand, even in volatile markets.

Strategic Allocation: Why Silver Outshines Gold in a Protectionist World

Gold's recent performance highlights the risks of relying solely on traditional safe-haven assets. While the tariff exemption for gold bullion has stabilized its market, it has also reduced its price volatility-a key driver of speculative returns. Silver, by contrast, combines the stability of a safe-haven asset with the growth potential of an industrial linchpin. Its price is influenced by both macroeconomic factors (e.g., inflation, tariffs) and sector-specific tailwinds (e.g., green tech adoption, AI expansion).

Moreover, silver's critical mineral status and supply constraints create a structural floor for its price. With governments prioritizing domestic production and stockpiling, investors are likely to see further policy-driven support for silver markets. This contrasts with gold, which faces diminishing returns as central banks and institutions increasingly treat it as a conventional asset rather than a strategic one.

Conclusion: A Dual-Function Asset for the New Era

Silver's unique position as both an industrial workhorse and a geopolitical hedge makes it an undervalued cornerstone for strategic allocation in a tariff-driven world. As green technologies and AI reshape global demand, and as protectionist policies exacerbate supply bottlenecks, silver's price trajectory is poised to outperform gold. Investors who recognize this duality-and act accordingly-will be well-positioned to capitalize on the next phase of the commodities bull market.