Original Title: Market Byte: Tariffs, Stagflation, and Bitcoin
Original Author: Zach Pandl
Translated by: Asher (@Asher_0210)
Editor's Note: This article analyzes the impact of recent changes in US global tariff policies on markets, particularly performance in this process; discusses the long-term economic effects of tariffs, asset allocation choices during stagflation, and the performance of Bitcoin and gold in such an environment;zes the impact of current trade tensions on the US dollar and potential Bitcoin adoption, and finally offers a prospect of economic outlook in the coming years, pointing out that Bitcoin and scarce commodities like gold may receive more attention and demand in a high-inflation environment.
Since April 2, when the US announced new global tariff global asset prices plummeted, until this morning when Trump announced a suspension of tariff policies (excluding China) that gradually recovered., tariff announcement almost affected all assets, and during this period, Bitcoin's decline was relatively small when measured by risk-adjusted benchbenchmarks. Therefore, if Bitcoin's correlation with stock market returns is 1:1, the S&P 500's decline with should mean Bitcoin's price would drop 36%. However, the reality is that Bitcoin only dropped 10%, highlighting that even during deep marketlines, holding holding Bitcoin as part of an investment portfolio can still provide significant diversification benefits.
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The moment most similar to President Trump's "Liberation Day" declaration in US history might be the "Nixon Shock" on August 15, 1971. That evening, President Nixon announced a comprehensive 10% tariff and ended the system of dollar convertibility to gold - a system that had supported the global trade and financial system since the end of World War II. This action triggered diplomatic activities between the United States and other countries, ultimately reaching the Smithsonian Agreement in December 1971, where other countries agreed to revalue their currencies relative to the dollar. The dollar ultimately depreciated between the second quarter of 1971 and the third quarter of 1978.
Trade tensions are expected to cause continued dollar weakness in the near term. According to relevant indicators, the US dollar is already overvalued, the Federal Reserve has room to lower interest rates, and the White House wants to reduce the US trade deficit. Although tariffs can change effective import and export prices, dollar depreciation may gradually rebalance trade flows through market mechanisms, thereby achieving the expected effect.
Child of the Times - Bit
The sudden changes in US trade policy are causing adjustments in financial markets, which will have short-term negative economic impacts. However, the market conditions of the past week are unlikely to become the norm for the next four years. The Trump administration is implementing a series of policy measures that will have different impacts on GDP growth, inflation, and trade deficits.
US macroeconomic policies will have a range of impacts on growth and inflation
Despite the uncertain prospects, the best guess is that US government policies will lead to continued dollar weakness and inflation above the target within 1 to 3 years. Tariffs themselves may slow growth, but this impact could be partially offset by tax cuts, deregulation, and dollar depreciation. If the White House actively pursues other growth-promoting policies, GDP growth may remain relatively good despite the initial tariff impact. Regardless of actual growth, historical evidence suggests that sustained inflationary pressures over a period may be favorable for scarce commodities like Bit and gold.
Moreover, like gold in the 1970s, Bit now has a rapidly improving market structure - supported by changes in US government policies. This year, the White House has implemented a series of broad policy changes that should support investment in the digital asset industry, including withdrawing a series of lawsuits, ensuring asset applicability to traditional commercial banks, and allowing regulated institutions to provide cryptocurrency services. This, in turn, has triggered a wave of mergers and acquisitions and other strategic investments. New tariffs are a short-term negative factor for digital asset valuations like Bit, but the Trump administration's cryptocurrency-specific policies have consistently supported the industry. Overall, the increased macroeconomic demand for scarce commodity assets and improved investor operating environments may be a powerful combination for widespread Bit adoption in the coming years.
