Due to worries about the trade war causing unease among investors, the Global Silver market is under immense pressure, key Indicators are frequently flashing red, and millions of ounces of Silver are flowing between trading centers, which may lead to disruptions in the coming months.

The surge in Precious Metals leasing rates has become the latest alarm signal, with anxiety about the impact of USA President Trump imposing further tariffs triggering a wave of Silver being shipped to the USA in hopes of capturing premiums in the New York market, which could lead to a rush in the London market.

This year, the Precious Metals (Gold and Silver) market has been impacted by Trump challenging the Global trade order. This has spurred safe-haven demand and led to rare pricing dislocations between key markets. Although spot Silver has risen about 17% this year, making it one of the best-performing Commodities, Silver Futures in New York have performed even better.

On the physical level, tariff concerns (especially the tariffs against Canada and Mexico, as well as broader reciprocal restrictions potentially coming into effect next month) have prompted dealers to move large amounts of Gold and Silver from London to US vaults. However, considering their relative value and density, Gold is often transported via Air Transportation, while Silver is typically shipped through Marine Transportation, which requires a longer journey.

Leasing rates (i.e., the cost of borrowing Metals, usually for short-term borrowing) have skyrocketed. This month, the 1-month leasing rate for Silver exceeded 6%, following an even larger increase in February. This partly reflects concerns over the rapid depletion of London Silver inventories, which hit a historical low last month. Additionally, not all remaining Silver inventories are available, as they are tied to some physically-backed ETFs.

Moreover, the total inventory reported by CME in the USA reflects market turbulence, with Silver inventories tracked by the exchange having expanded to the highest level since 1992, surging 40% so far this quarter, reaching a historical high. Although New York is still attracting Metal, there are also concerns that a Silver shortage in London could create long-term chaos.

George Heppel, an Analyst at Bank of Montreal Capital Markets, stated in a report: "If the legendary 'Silver squeeze' becomes a reality, this slower flow of trade will be a key factor in prolonging any potential chaos." He noted that this is because it takes time for Silver inventories to flow back from the USA to London.

About 70% of Silver imports to the USA come from Canada and Mexico, which have so far been the primary targets of trade actions by the Trump administration. Subsequently, Canada announced a 25% retaliatory tariff on about 30 billion Canadian dollars (20.8 billion USD) worth of American-made goods, including Silver. Trump later reiterated his desire to implement new tariffs on April 2.

Analysts like Max Layton from Citigroup highlighted this pricing mismatch in a report, stating: "The market may be underestimating the scale and impact of the equal tariffs that will be implemented on April 2 in the USA." They noted that if the equal tariffs are enacted within the next six months, Silver could have a "huge potential upside," adding that Silver is unlikely to be exempt from tariffs.

TD Securities also expressed concerns. Senior Commodity Strategist Daniel Ghali stated, "If the equal tariffs are indeed equal, you would expect Canadian Silver to face retaliatory tariffs, which accounts for about 20% of imports to the USA, thus increasing the associated risks for Silver. Even if the chaos resolves overnight, we cannot return to the previous world because you never know what might happen the next day."