Silver retreated from a nearly 14-year high as the dollar pushed higher after U.S. President Donald Trump escalated trade tensions on the European Union and Mexico, the world’s top producer of the white metal.

Spot silver slipped as much as 0.8 per cent as the greenback advanced during U.S. trading hours. The precious metal is priced in U.S. currency, so the strength in the dollar makes it less attractive for foreign investors.

Trump unleashed tariff threats this weekend, declaring a 30 per cent rate for Mexico and the EU, and informing key trading partners of new rates that will kick in on Aug. 1 if they cannot negotiate better terms.

Earlier, silver climbed above US$39 an ounce amid tightening physical supply. The implied annualized cost of borrowing the metal for one month has jumped to more than six per cent, compared with the typical rate near zero.

The expanding appetite for the metal has left the physical market under strain in London, where most silver is held by exchange-traded funds — meaning it isn’t available to lend or buy. Since February, the volume of silver-backed ETFs has expanded by some 2,570 tons, according data compiled by Bloomberg.

Silver’s outperformance relative to gold means that the ratio between the two has dropped in recent months, though silver still remains relatively cheap historically. It currently takes about 86 ounces of silver to buy an ounce of gold, compared with a 10-year average of 80.

Concerns over U.S. trade policy have also helped to push the metal higher. Mexico, the largest producer of silver and a key supplier to the U.S. market, has been hit with a 30 per cent tariff threat. The terms of the Canada-United States-Mexico Agreement (CUSMA) exclude silver from the latest levies, but some traders expressed concerns about the possibility that exemption could be threatened.

The metal is up 32 per cent this year, surpassing gold’s 27 per cent gain. As well as being a haven asset, silver also has industrial uses, most notably in solar panels. The market is headed for a fifth year in deficit, according to the Silver Institute, an industry group.

Silver fell 0.5 per cent to US$38.23 after 4 p.m. on Monday in New York, rebounding slightly above US$38.30 on Tuesday. Gold, platinum and palladium also slipped.

—With assistance from Yihui Xie, Sybilla Gross and Jack Ryan.

Bloomberg.com