Analysts predict that the demand for industrial precious metals, specifically platinum and palladium, may decrease due to potential tariffs on U.S. auto imports proposed by the President, which could lead to a decline in vehicle sales. President Trump suggested that these tariffs could be implemented as early as April 2, potentially raising import costs and reducing demand for cars exported to the United States.
This shift in the automotive industry is expected to impact platinum, palladium, and rhodium, collectively known as platinum group metals, which are essential components in vehicle exhaust systems for gas, diesel, and hybrid vehicles. Market analyst Zain Vawda from MarketPulse by OANDA noted that such tariffs typically result in inflation, higher interest rates, and slower economic growth, ultimately weakening the demand for platinum and palladium.
With the auto sector representing a significant portion of the global demand for these metals—40% for platinum and 80% for palladium— the potential imposition of tariffs on U.S. auto imports could lead to a projected 1% decline in global platinum demand (around 102,000 ounces) and a 4% decrease in global palladium demand (364,000 ounces) this year.
The U.S. auto industry heavily relies on imported parts and fully assembled vehicles, especially from countries like Mexico, Canada, and Germany's Volkswagen, which manufactures a substantial portion of its North American fleet in Mexico.
If these tariffs indeed result in a reduction of up to one million units in U.S. vehicle sales, PGM Research Director Wilma Swarts from Metals Focus anticipates a potential drop of approximately 150,000 ounces in PGM demand this year, specifically from internal combustion engine and hybrid vehicles.
David Whiston, equity strategist for U.S. autos at Morningstar, highlighted that American consumers might shy away from purchasing vehicles impacted by tariffs due to the higher prices they would incur.
The announcement of the auto tariff plans by President Trump on February 19 caused spot platinum and spot palladium prices to decrease by over 2%, with further declines of about 5% and 7% observed since then.