Original Author: Moulik Nagesh
Original Source: Binance Research
Key Points
In 2025, U.S.-led trade protectionism made a strong comeback. Since Donald Trump's re-inauguration in January 2025, the United States has raised concerns about a global trade war 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. 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 escalated further on April 2nd. The U.S. announced comprehensive "reciprocal" tariffs, naming 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: On top of the base rate, higher country-specific tariffs were added. 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: EU goods at 20%, Japan at 24%, Vietnam at 46%, and a 25% tariff on automotive imports. Canada and Mexico, already subject to a 20% tariff in February, were not included in 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 the implementation of "reciprocal" tariffs and increasing trade tensions, more countries are expected to introduce their own countermeasures. The EU has clearly stated it will respond soon, and several other major economies have prepared retaliation plans. While the full extent of global response remains unclear, all indications suggest a broad trade war involving multiple fronts is taking shape.
Chart 1: Tariffs on April 2nd, 2025 "Liberation Day" Cover 60 Countries, Including Major U.S. Trading Partners
Note: The table reflects the "reciprocal" tariffs imposed by the U.S. on its top ten import sources on April 2nd.
Source: BBC, X (@WhiteHouse), Binance Research, as of April 3rd, 2025
These policies have pushed U.S. import tax rates to their highest level since the Smoot-Hawley Tariff Act of 1930, which imposed comprehensive tariffs on thousands of goods during the Great Depression. Based on current data, the U.S. average tariff rate has risen to approximately 18.8%, with some estimates as high as 22%—a dramatic leap from 2024's 2.5%.
For reference, the U.S. average tariff rate typically remained between 1-2% over the past decades; even during the U.S.-China trade friction of 2018-2019, it only rose to around 3%. Therefore, the 2025 measures constitute an unprecedented tariff shock in modern history—almost equivalent to returning to 1930s protectionism.
Chart 2: U.S. Tariff Resurgence Pushes Import Tax Rates to Highest Level in Nearly a Century
Source: Tax Foundation, Binance Research, as of April 3rd, 2025
Market Impact: Demand Cooling, Risk Aversion, and Volatility Surge
1. Demand Cooling and Rising Risk Aversion
Market sentiment has clearly shifted to caution, with investors displaying typical "risk-avoidance" behavior in response to tariff announcements. The crypto market's total market cap has dropped approximately 25.9% from its January peak, with nearly $1 trillion in value evaporated, highlighting its high sensitivity to macroeconomic instability.
Crypto assets closely mirrored stock market trends, both facing demand cooling, widespread selling, and entering correction zones. In contrast, traditional safe-haven assets like bonds and gold performed brilliantly, with gold continuously setting new historical highs as investors' refuge during increased macroeconomic uncertainty.
Chart 3: Since Initial Tariff Announcement, Crypto Market Down 25.9%, S&P 500 Down 17.1%, While Gold Rises 10.3% and Continuously Sets New Historical Highs
Source: Investing.com, CoinGecko, Binance Research, as of April 4th, 2025
The severe market reaction also highlights crypto assets' performance characteristics during intense "risk-avoidance" periods: Bitcoin (BTC) dropped 19.1%, with most mainstream Altcoins experiencing similar or even greater declines. Ethereum (ETH) fell over 40%, while high-beta sectors like MEME coins and AI-related tokens plummeted over 50%. This sell-off erased most of the crypto market's early-year gains, with BTC's year-to-date (YTD) returns turning negative by early April, despite strong performance in 2024.
Chart 4: Under Macro Panic Triggered by Tariffs, Altcoins Declined Significantly More Than Bitcoin, Intensifying Market Pessimism
Source: CoinGecko, Binance Research, as of April 4th, 2025
As the crypto market increasingly exhibits risk asset characteristics, continued trade wars may further suppress capital inflows and short-term digital asset demand. Funds may remain cautious or shift to perceived safer assets like gold. This sentiment is reflected in recent fund manager surveys, with only 3% of respondents indicating they would allocate Bitcoin in the current environment, while 58% prefer gold.
Chart 5: Only 3% of Global Fund Managers View Bitcoin as the Preferred Asset Class in Trade War Scenarios
Source: BofA Global Fund Manager Survey, Binance Research, as of February 2025
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 largest single-day decsincelines the COVID-19 market crash in 2020. By the end th of 2025, when Trump suddenly announced plans to impose tariffs on Canada and the EU, BTC dropped approximately 15% in the following days, with with its actual volatility significantly increasing. ETH showed a similar trend, with its one-month volatility surging from around 50% to over 100%.
These market behaviors highlight that in the current high-uncertainty macroeconomic environment, the crypto market is extremely sensitive to sudden policy changes. In the foreseeable 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-month actual volatility rose above 70%, while ETH exceeded 100%, reflecting the market's violent fluctuations after tariff announcements
A potential path is to regain its attractiveness during monetary inflation and fiat currency depreciation, especially when the Federal Reserve shifts towards easing. If the Fed begins to cut rates while inflation remains high, BTC 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 investment 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. 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 further 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 intensify 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 Federal Reserve and other major central banks balance inflation and recession will determine asset liquidity. If they refuse to cut rates during slowing growth, risk assets will continue to be pressured; if they shift to easing, it may bring comprehensive stimulation. If real interest rates decline (whether due to policy or persistent inflation), long-duration assets like BTC 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 in the current macro context, potentially breaking crypto assets' "macro binding" state and re-emphasizing 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 and crypto markets. In the short term, the crypto market may continue to exhibit high volatility, with investor sentiment swaying with trade war news.
If inflation remains high while growth slows, the Fed's response will be a critical turning point: if it shifts to easing, the crypto market may rebound due to liquidity recovery; if it maintains a hawkish stance, risk assets will continue to face pressure.
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.
