Editor's Note: The article explores the value of cryptocurrencies as a hedging tool against the backdrop of escalating global trade wars and tariff barriers. The author points out that tariff policies drive up inflation, distort markets, and historical evidence proves their drawbacks outweigh their benefits. Cryptocurrencies, with their decentralized nature, sovereign attributes, and cross-border liquidity, may become a new asset choice for addressing geopolitical uncertainties and economic chaos. Although cryptocurrencies like Bitcoin have not yet fully demonstrated their "digital gold" hedging properties, the borderless economic system they are building is challenging the traditional financial order.
The following is the original content (slightly edited for readability):
As trade wars reshape the global economic landscape, cryptocurrencies once again have the opportunity to prove their value as a chaos hedging tool.
Background Context
"Madness is rare in individuals, but in groups, parties, nations, and eras, it is the norm." - Friedrich Nietzsche
Market volatility is intense. As Singapore's Prime Minister said, the United States is essentially abandoning the economic system it built with its own hands. The cornerstone of the global economic system is being gradually dismantled. The author believes that if the situation cannot be quickly controlled, more areas will face collapse.
Cryptocurrencies have always been macro-driven assets. One of the core arguments of Bitcoin fundamentalists throughout the year has been "sovereignty".
In short - Bitcoin as an asset can hedge geopolitical uncertainties, as it is a more solid monetary form (theoretically) than gold. However, so far, this theory has not been verified: Bitcoin's trading attributes are closer to the Nasdaq beta coefficient, and its performance during turbulent periods is far inferior to gold. Will this time be different?
Tariff Nature Analysis
If you want to witness intellectual self-indulgence, there's no better time than scrolling through Twitter right now - everyone suddenly becomes a macroeconomist. To avoid adding cognitive burden, the author will only list objective facts:
· Tariffs essentially create inefficiency, drive up consumer prices, distort free markets, and trigger economic retaliation and conflict escalation.
· A typical case can be traced back to the 1980s: Although President Ronald Reagan initially implemented tariffs in some areas, he ultimately acknowledged their drawbacks. In his 1987 broadcast speech, he clearly stated: "Protectionism ultimately becomes destructionism, at the cost of employment."
Why Tariffs Are Not a Good Thing
First, the current effective tariffs implemented by Trump are at the highest level in over 100 years - but there are many reasons to oppose them:
Economic Impact and Inflation
The core of tariffs is a tax on imported goods, paid by domestic importers, and these costs are often passed on to consumers. Historical and contemporary evidence consistently shows that tariffs directly lead to consumer price increases.
· For example, according to the Tax Foundation, recent U.S. tariffs will increase the average household tax burden by over $2,100.
· Yale University's Budget Lab estimates the annual impact could be as high as $3,800 per household.
· UBS predicts that just a 10% universal tariff could trigger a 10% stock market decline.
Misunderstanding Trade Deficits
One of the core arguments supporting tariffs is massive trade deficits. However, trade deficits themselves do not mean economic weakness or exploitation.
· It simply indicates that a country imports more goods than it exports, typically driven by strong consumer demand, currency strength, or comparative advantages in services rather than goods.
· For example, the United States has long enjoyed significant surpluses in high-value service areas like finance, technology, and high-end manufacturing. Implementing tariffs on goods trade deficits, especially when many countries lack the wealth or demand to import U.S. products, will only artificially raise prices for U.S. consumers.
· Countries like Cambodia and Kiribati are typical examples of this situation, where trade deficits exist because these countries are too poor to purchase U.S.-made products, not because they engage in unfair trade.
Historical Consequences of Tariffs
Historically, protectionist tariffs often led to economic recession rather than prosperity.
· Famous examples include the 1828 Tariff Act and the notorious 1930 Smoot-Hawley Tariff Act. The latter exacerbated the Great Depression by triggering retaliatory tariffs, shrinking global trade scale, and deepening global economic difficulties.
· Economists generally agree that history repeatedly proves tariffs often do more harm than good.
· Even McKinley, often viewed by Trump as a tariff inspiration, began to oppose tariffs by the end of his presidency, acknowledging their negative economic impact.
Inefficiency and the Employment Creation Myth
Tariffs are often promised to revive domestic manufacturing and create employment opportunities. However, modern manufacturing is highly automated and capital-intensive, meaning even if factories return to the U.S. mainland, they will require fewer workers.
· As global automation accelerates, tariff-driven reshoring will not bring the employment boom politicians often promise.
· In reality, many manufacturers either absorb higher costs or slightly inefficiently shift to other low-cost countries, resulting in minimal new domestic job opportunities.
· The unintended consequences are often economic stagnation or recession. When Argentina adopted protectionist policies under Peronism, it transformed from one of the world's wealthiest countries to an economic ruin, never fully recovering.
Strategic Risks in Global Trade Dynamics
Tariffs may unintentionally enhance the power of geopolitical opponents by triggering global trade readjustments. Historical evidence emphasizes that trade wars are harmful globally, causing economic contraction, supply chain instability, and significantly damaging consumer welfare.
· For example, Trump's recent widespread tariffs not only raised domestic prices but also unintentionally benefited China by disrupting supply chains of countries competing with China.
· Countries like Vietnam, previously positioned as alternatives to China, now face high tariffs and may be pushed to return production to China due to its scale economy and manufacturing efficiency, despite high tariffs.
· Moreover, tariffs may provoke retaliatory measures from trading partners, igniting trade wars. The EU has hinted at potential retaliatory tariffs, especially targeting U.S. tech companies, increasing the risk of broader economic conflict.
Markets Hate Uncertainty
Markets hate uncertainty, and tariffs precisely bring this uncertainty. Trump's recent tariff statements have already caused severe market volatility, with stock market volatility rising sharply.
· Retail, technology, consumer goods, and manufacturing sectors are particularly affected, expecting increased input costs and reduced consumer spending.
· Additionally, tariffs weaken the U.S. dollar by reducing global trust and capital inflows, leading to broader economic instability. This volatility not only undermines consumer and business confidence but also suppresses investment, further hindering economic growth.
Misunderstandings about National Security
National security is one of the few legitimate reasons that can be used for limited strategic tariffs.
· However, the current tariff system is widely and indiscriminately applied, severely undermining the credibility of genuine national security arguments.
· The current practice is not strategically protecting key industries, but rather indiscriminately raising costs for almost all imported goods, while damaging both strategic and non-strategic sectors.
Cryptocurrency: Hedging Chaos
Tariffs and trade wars powerfully remind people that nations are ultimately groups composed of humans, driven by inherent emotions and tribal decisions—decisions aimed at benefiting their own group, even if irrational from a broader perspective. In such an environment, cryptocurrency becomes particularly important, as it represents true personal ownership and self-sovereignty, providing the highest form of economic agency in a world increasingly influenced by unpredictable geopolitical manipulation.
Cryptocurrency → A super digital economic system used for chaos hedging.
As Ray Dalio aptly pointed out, trade conflicts rarely truly concern trade, but are more about identity, pride, domestic politics, and emotional interests. Meanwhile, beneath the noise of geopolitical conflicts, cryptocurrency is quietly building an alternative economic infrastructure where tariffs and traditional boundaries no longer exist.
Traditional governments can barely accurately track digital services and intangible economic activities in surplus and deficit calculations. Cryptocurrency elevates this to a whole new level, encapsulating digital activities and transactions that transcend boundaries, tariffs, and political friction.
Technically, we still need to figure out how to properly combine cryptocurrency's on-chain attributes with new business models (referencing my previous argument), but this is ongoing.
Conclusion: When government actions are unpredictable or fail to safeguard citizens' interests, how should global sovereign individuals allocate resources? Cryptocurrency offers its own answer.
Welcome to join BlockBeats official community:
Telegram Subscription Group: https://t.me/theblockbeats
Telegram Communication Group: https://t.me/BlockBeats_App
Twitter Official Account: https://twitter.com/BlockBeatsAsia
