Silver Navigates a Maze of Crosscurrents: Tariff Pivots, Solar Substitution, and a Deepening Supply Deficit

Silver near $89 as sixth-year supply deficit offsets India's 15% import tax, solar shift to copper, and US-China tariff truce.

Silver has proven remarkably resilient in the face of a barrage of contradictory forces. A supply deficit that is stretching into its sixth year continues to provide a sturdy floor, even as the solar industry shifts away from the metal, India slaps on a hefty import tax, and the US and China pause their trade war. The result is a market that is simultaneously starved of material and facing demand shocks from multiple directions.

India’s government delivered the most recent blow, raising the effective import duty on silver to 15% as of Wednesday last week. New Delhi’s move is aimed at cooling the nation’s insatiable appetite for the white metal, protecting a fragile trade balance and shoring up the rupee. Industry watchers expect Indian silver imports to slump by as much as 20% in the near term. Yet this sudden drag from Asia has done little to dislodge prices: the spot contract hovered near $89 an ounce on Monday before retreating to around $88 by Thursday.

That resilience stems from a market that has been structurally starved for years. The Silver Institute forecasts a deficit of 67 million ounces for the current year, a gap that could widen further as industrial demand picks up. For 2026, analysts project a shortfall of roughly 46 million ounces, a 15% jump from the prior year and the sixth consecutive annual deficit. Since 2021, more than 760 million ounces have been drained from above-ground inventories to feed a booming industrial sector, including battery makers, electric-vehicle manufacturers, and operators of power-hungry AI data centres.

Paradoxically, one of the biggest end-users — the solar industry — is now trying to wean itself off silver. Module makers cut their consumption by 6% last year, and experts expect demand from that segment to fall further to around 151 million ounces in 2026. High prices have forced a reckoning. Chinese giants such as Longi Green Energy Technology plan to replace silver with copper in new solar cells, with mass production slated for the second quarter. Jinko Solar and Shanghai Aiko Solar Energy are also moving toward copper-based or completely silver-free panels. The substitution is technically complex, but it is already dragging down the sector’s total usage.

A separate demand shock arrived via the diplomatic channel. In early May, Washington and Beijing agreed to a 90-day tariff truce. The US slashed import levies from 145% to 30%, and Chinese manufacturers, who had been hoarding cash and running down inventories, rushed to restock their silver supplies. That wave of buying hit a market where mine output has been shrinking for five years. Futures traders responded by crushing the gold-silver ratio — the number of ounces of silver needed to buy one ounce of gold — from 62 to below 55 in the space of a week.

Macroeconomic crosswinds are complicating the picture. The standoff between the US and Iran has closed the Strait of Hormuz to commercial shipping, cutting off millions of barrels of daily oil supply. Brent crude punched above $107 a barrel recently, and the International Energy Agency has called it a historic supply interruption. Soaring energy costs are feeding into inflation: US consumer prices rose an unexpectedly strong 3.8% in April, while Germany logged 2.9%, its highest reading since early 2024. Central banks are now boxed in. Morgan Stanley analysts see the Federal Reserve holding off on rate cuts until at least 2027.

Higher interest rates are normally a headwind for non-yielding assets like silver, but the metal’s industrial uses and the sheer depth of the supply deficit are overriding that logic. On Monday, silver posted its strongest daily gain in months, surging 7% in a single session. The nominal all-time high of roughly $121 an ounce, set in January, remains the next major target for buyers. For now, the structural scarcity is acting as a powerful anchor — even as solar savings, Indian duties, and tarifftruce restocking tug at the market from three different directions.