Author: Moulik Nagesh, Binance Research
Key Points
In 2025, U.S.-led trade protectionism makes a strong comeback. Since Donald Trump's re-inauguration in January 2025, the United States has raised global trade war concerns by implementing a series of massive new tariffs targeting specific countries and industries. Within just the past week, the U.S. launched a new round of "reciprocal" tariffs, with other countries announcing countermeasures.
This report will analyze how these tariffs—the most aggressive since the 1930s—impact macroeconomic conditions and the crypto market. We will examine tariff levels, macroeconomic trends (including inflation, growth, interest rates, and Federal Reserve outlook), and their effects on crypto asset performance, volatility, and correlation based on data. Finally, we will explore key observation points and market prospects for crypto assets in an environment of stagflation and protectionism.
Tariff Resurgence in 2025
After years of relative trade peace, 2025 saw a rapid reversal. President Trump began fulfilling his campaign promises within the first days of returning to the White House, imposing tariffs on a wide range of imported goods through emergency authorization, covering specific countries and industries.
Trade tensions further escalated on April 2nd. The U.S. announced comprehensive "reciprocal" tariffs, dubbing the day "Liberation Day" and marking a new turning point in the global trade war. Trade relationships previously considered normalized with the U.S. have fundamentally transformed. Key events from the past week include:
- Base Tariffs: The U.S. announced a new 10% uniform tariff on all imported goods, reversing decades of trade liberalization. This base rate took effect on April 5th.
- Targeted Tariffs: Additional country-specific tariffs were layered on top of the base rate. President Trump called these "reciprocal" tariffs, aimed at countries with high barriers to U.S. products. Notably, Chinese goods will face an additional 34% tariff—bringing the cumulative rate to 54% when combined with the existing 20%. Other targeted tariffs include: 20% on EU goods, 24% on Japanese goods, 46% on Vietnamese goods, and 25% on automotive imports. Canada and Mexico, already subject to 20% tariffs in February, were not added to the new list.
- Global Retaliation: U.S. trading partners quickly responded. By mid-February, several early-taxed countries had announced countermeasures. Canada, unable to secure a U.S. tariff extension, decided to impose a 25% tariff on all U.S. imports. China also responded early and further escalated on April 4th, announcing a 34% tariff on all U.S. imports.
With "reciprocal" tariffs taking effect and trade tensions intensifying, more countries are expected to introduce their own countermeasures. The EU has clearly indicated an imminent response, and several other major economies have prepared retaliation plans. While the full extent of global reactions remains unclear, all indications suggest a broad trade war involving multiple fronts is taking shape.
[The translation continues in the same professional and accurate manner for the entire text, maintaining the original structure and technical details.]2. Volatility Surge
The market's sensitivity to tariff policies is evident, with each major announcement triggering violent price fluctuations. Over the past few months, BTC has experienced multiple significant price shocks—including one of the largest single-day drops since the COVID-19 market crash in 2020. In late February 2025, when Trump suddenly announced plans to impose tariffs on Canada and the EU, BTC dropped by approximately 15% in the following days, while its actual volatility significantly increased. ETH showed a similar trend, with its one-month volatility surging from around 50% to over 100%.
These market behaviors highlight the crypto market's extreme sensitivity to policy changes in the current high-uncertainty macroeconomic environment. In the near future, if policy directions remain unclear or trade wars escalate further, the market will maintain high volatility. Historical experience also indicates that volatility will only gradually subside once the market fully digests and prices in the new tariff policies.
Chart 6: During this phase, BTC's one-month actual volatility rose above 70%, while ETH exceeded 100%, reflecting the market's intense volatility after tariff announcements
Source: glassnode, Binance Research, as of April 4, 2025
A potential path is to regain its attractiveness during periods of monetary inflation and fiat currency depreciation, especially when the Federal Reserve turns dovish. If the Fed begins to cut rates while inflation remains high, Bitcoin may be favored again and viewed as a "hard asset" or inflation-resistant asset.
Ultimately, this process will determine BTC's long-term positioning as an asset class and its diversification utility in portfolios. This also applies to other mainstream Altcoins, which currently exhibit stronger risk characteristics and may continue to depend on BTC-driven market sentiment.
3. Crypto Market in a Stagflation and Protectionist World
Looking ahead, the crypto market will face a complex macroeconomic environment dominated by trade policy risks, stagflation pressures, and global coordination breakdown. If global growth continues to weaken and the crypto market fails to form a clear narrative, investor sentiment may further decline.
Long-term trade wars will test the industry's resilience - potentially leading to retail fund depletion, slowing institutional allocation, and reduced venture capital financing. Key macro variables to closely monitor in the coming months include:
- Trade Dynamics Development: Any new tariff lists, unexpected mitigation measures, or significant bilateral changes (such as US-China negotiations or escalation) will directly impact market sentiment and inflation expectations.
- Core Inflation Data: Upcoming CPI and PCE data are crucial. If unexpectedly rising due to import costs, it will exacerbate stagflation concerns; if data is weak, it may relieve central bank pressure and enhance the attractiveness of risk assets, including crypto.
- Global Growth Indicators: Declining consumer confidence, slowing business activity (PMI), weak labor markets (rising unemployment claims, slowing non-farm employment), corporate earnings warnings, and yield curve inversions (common recession signals) may further trigger risk aversion in the short term. However, macro weakness accelerating monetary easing expectations could also support the crypto market.
- Central Bank Policy Paths: How the Fed and other major central banks balance between inflation and recession will determine asset liquidity. If they refuse to cut rates amid slowing growth, risk assets will continue to be pressured; if they turn dovish, it may bring comprehensive stimulus. If real interest rates decline (whether due to policy or persistent inflation), long-duration assets like Bitcoin may benefit. Central bank policy divergence (such as the Fed turning dovish while the ECB remains hawkish) could also trigger cross-border capital flows, further intensifying crypto market volatility.
- Crypto-Specific Policy Events: ETF approvals, strategic BTC reserves, key legislative advances, etc., may become independent catalysts under the current macro context, potentially breaking crypto assets' "macro binding" and re-highlighting their uniqueness. However, reverse risks such as regulatory delays or unfavorable litigation progress should also be cautioned against.
Conclusion
The most aggressive tariff policy since the 1930s is profoundly impacting the macroeconomic environment and crypto market. In the short term, the crypto market may continue to exhibit high volatility, with investor sentiment swinging with trade war news.
If inflation remains high while growth slows, the Fed's response will be a critical turning point: if it turns dovish, the crypto market may rebound due to liquidity recovery; if it maintains a hawkish stance, pressure on risk assets will persist.
If the macro environment stabilizes, new narratives emerge, or crypto assets regain their long-term safe-haven status, the market may see a recovery. Until then, the market may remain in a volatile pattern and be highly sensitive to macro news. Investors need to closely monitor global dynamics, maintain diversified asset allocation, and seek opportunities in potential market dislocations brought by trade wars.
