I. Introduction
After returning to the White House, Trump quickly fulfilled his campaign promises regarding tariffs, triggering an unprecedented tariff storm described by outsiders as launching "Tariff War 2.0", causing violent fluctuations in traditional financial and cryptocurrency markets. Bitcoin and the entire cryptocurrency market experienced significant declines under this pressure, with numerous crypto projects facing difficult challenges. This article will analyze the specific measures of Trump's new tariff policy, its macroeconomic transmission mechanism, the subsequent direction of US tariff policy, and its profound impact on the crypto market, helping investors comprehensively understand the risks and opportunities.
II. Trump's Tariff Policy Since Returning to the White House
February: Wielding the Tariff Stick
(1) Targeting North America: On February 1st, the US announced a 25% tariff on all imports from Canada and Mexico (including a 10% tariff on Canada's energy resources) to pressure both countries to strengthen border security, immigration control, and combat drug smuggling. Canada immediately announced 25% retaliatory tariffs on billions of dollars of US products, and Mexico also planned countermeasures.
(2) Targeting China: On the same day, Trump announced a 10% tariff on all Chinese goods exported to the US, effective February 4th. This move was claimed to pressure China to take action to curb drug smuggling like fentanyl into the US. Trump also signed an executive order canceling the previous duty-free policy for low-value goods from China and Hong Kong (under $800), meaning these small packages would now be subject to a new 10% tariff. These initial measures marked the beginning of the Trump administration's new tariff policy.
March: Tariff Negotiation Tug-of-War
(1) NAFTA Tariff Turbulence: On March 4th, the Trump administration officially imposed a 25% tariff on all goods produced by Mexico and Canada. Canada immediately announced synchronized tariffs on US products, and Mexico also indicated it would develop retaliatory measures, raising new trade war concerns. Just one day later, on March 5th, Trump temporarily exempted tariffs on Canadian and Mexican automobiles for a month to alleviate pressure on the three major auto enterprises. On March 6th, Trump signed an executive order postponing tariffs on Mexico and Canada until April 2nd to continue negotiations. Canada and Mexico thus temporarily suspended their originally planned counter-measures. Despite a brief easing, on March 7th, Trump threatened new tariffs on Canadian lumber and dairy products, criticizing Canada for long-term high tariffs on US agricultural products, and stating the US would respond with reciprocal tariffs. Trump directly stated that "there will be more changes and adjustments in tariffs in the future", and this series of fluctuating actions highlighted the aggressive and volatile nature of the Trump administration's tariff policy, destabilizing the North American free trade relationship in a short time.
(2) Steel and Aluminum Tariffs Return: The Trump administration also resumed high tariffs on global steel and aluminum products in March. Starting March 12th, the US reimposed tariffs of 25% on imported steel and 10% on aluminum (based on Section 232 national security grounds), which was essentially a comeback of measures implemented during Trump's first term. In response, the EU implemented retaliatory tariffs of 4.4% to 50% on US steel and aluminum products starting April 1st.
April: Tariff War Escalation
"Liberation Day" Universal Tariffs: On April 2nd, Trump announced a new round of tough tariff measures at the White House, dubbed "Liberation Day" tariffs. He signed two executive orders on "reciprocal tariffs":
(1) Universal Taxation: Starting April 5th, an additional 10% "universal" tariff would be imposed on imported goods from 185 countries. This meant that except for a few exemptions, the US would add a 10% ad valorem tax to most imported products. USMCA partners Canada and Mexico were temporarily exempted from this 10% universal tariff, and small e-commerce packages (<$800) were also temporarily suspended to reduce impact on daily consumption.
(2) Reciprocal Taxation: For economies with significant trade deficits with the US, additional reciprocal tariff rates would be imposed on top of the 10%, effective April 9th. Specific countries and rates included: China 34%, EU 20%, Japan 24%, South Korea 25%, Taiwan 32%, India 26%, Thailand 36%, etc. Additionally, an extra 25% tariff would be imposed on all imported automobiles and parts, effective April 3rd, aimed at driving automotive industry "reshoring" to the US. This round of tariffs nearly encompassed all major global trading nations, with an unprecedented breadth and high rates, described as dropping a "tariff nuclear bomb".
Source: https://www.bbc.com/
Such a dramatic tariff surge undoubtedly triggered strong global shockwaves, with countries rapidly responding: On April 3rd, the EU and Canada clearly stated they were "ready to retaliate", while Japan sought exemptions; on April 4th, China announced 34% tariffs in reciprocal retaliation. Trump then threatened an additional 50%, which combined with previous tariffs would rise to 104%. China simultaneously announced countermeasures, increasing tariffs on all US imports to 84% from April 10th. The US and major economies, particularly China, entered a back-and-forth comprehensive trade conflict.
Less than 24 hours before the US was set to impose high reciprocal tariffs on dozens of trading partners, Trump suddenly changed his stance. On April 9th, Trump announced a 90-day tariff suspension after over 75 countries had contacted US representative agencies for consultation, with universal tariffs reduced to 10% immediately. The suspension did not apply to tariffs on Mexico and Canada. Simultaneously, tariffs on Chinese goods would be raised from 104% to 125%.
III. Transmission Mechanism of Tariff Policy Impacting Crypto Markets
Trump's new tariff policy not only changed the international trade landscape but also influenced Bitcoin and other cryptocurrency markets through multiple macroeconomic channels. Tariffs, as an important macroeconomic policy tool, would generate chain reactions in economic growth, inflation, capital flow, exchange rates, and market sentiment, thereby transmitting to crypto asset prices.
- Economic Slowdown and Inflation Concerns: Large-scale tariffs are equivalent to taxing imported goods, directly raising costs for businesses and consumers. This will elevate inflationary pressures and drag down economic growth. Rising inflation expectations coupled with economic slowdown are dangerous signals for the market, causing investors to often turn to traditional safe-haven assets. In fact, amid increased tariff uncertainty, investors have preferred gold over emerging assets like Bit this year: International gold prices briefly broke through the historical high of $3,150 per ounce in early April. Although Bit is viewed as an anti-inflation "digital gold", market performance shows that its speculative attributes temporarily overshadow its hedging attributes, with inflation-driven hedging demand primarily flowing to traditional assets like gold.
- US Dollar Liquidity Tightening and Liquidation Needs: Trade wars disrupt global supply chains and trade, potentially leading to tighter US dollar liquidity. Declining imports and exports will reduce dollar supply in trade, while trade uncertainty makes enterprises and investors more inclined to hold cash, increasing dollar demand. In this situation, some institutions and investors might be forced to liquidate assets to raise US dollar cash. Some investors in a sharply declining stock market might sell crypto holdings for cash. Such selling pressure exacerbates price declines. Risk-averse sentiment might also push up the US dollar exchange rate, putting pressure on Bit prices denominated in dollars. Currently, under tariff impact, the market expects the Federal Reserve to cut rates earlier to support growth, driving US bond yields to sharp drops (US 10-year Treasury yield dropped 20 basis points after tariff news). Changes in rate expectations also influence fund allocation preferences: Safe-haven funds flow into bond and dollar assets, relatively weakening willingness to allocate to high-risk assets.
- Market Risk Appetite and Sentiment Shift: Large-scale tariffs are seen as major negative news, directly shaking global investors' risk appetite. Trade tensions triggered by Trump's tariff policies cause market uncertainty to soar, with investors tending to "sell first and observe". Stock market and Bit declines show high correlation, with TradingView data showing a correlation coefficient of 0.66 between Bit price and S&P500 index, indicating that under severe risk impacts, Bit is currently viewed by the market as a risk asset rather than a safe haven. Uncertainty from tariff policies has also weakened previous market optimism. Trump once released friendly signals towards crypto during campaign and early presidency, driving Bit to surge to around $109,000 by late 2024. However, trade war clouds quickly spread, and as trade prospects deteriorate and economic downward pressure increases, market risk aversion dominates, significantly weakening crypto assets' previous upward momentum.
The Trump administration emphasizes that tariff revenues can be used to support domestic industries and infrastructure, and may potentially make slight adjustments to tariffs on certain goods through negotiations. However, high tariffs in key areas such as new energy and semiconductors are expected to be long-term. If the economy significantly deteriorates in the second half of 2025, it is not ruled out that the Trump administration may be forced to adjust its tariff strategy.
5.2 Impact of US Tariff Policies on Monetary Policy
Under the tariff impact, the deteriorating growth prospects are expected to force the Federal Reserve to ease policies earlier than originally planned. Investors anticipate that the Fed may begin cutting rates in the second half of 2025. JPMorgan Private Bank's analysis points out that the market expects the Fed to lower rates to around 3.5% by the end of the year, believing that growth risks will overshadow inflation risks as the primary driver of lower yields. However, trade war-induced recession concerns on one side and tariff-driven inflation restricting the central bank's easing space on the other increase market uncertainty.
If tariffs are maintained long-term, high import taxes would effectively impose a stagflation shock on the US economy. If all tariffs are implemented, the resulting price increases might put the Federal Reserve in a dilemma: rate cuts could stimulate inflation and asset bubbles, while not cutting rates would create enormous downward economic pressure. If trade negotiations make progress and tariffs are partially lifted, it could improve growth expectations, reduce inflationary pressure, and open up space for Fed rate cuts. At that time, improved liquidity would benefit various assets, including Bit.
5.3 Future US Tariff Policy Direction and Potential Impact on Crypto Market
If trade tensions can be alleviated in the short term, global risk appetite may recover, potentially triggering a new round of crypto currency appreciation. Especially if the Federal Reserve can smoothly cut rates or even re-expand its balance sheet to release liquidity, Bit and Ethereum, which have experienced deep adjustments, may regain strength. Given Trump's personal and team's relatively friendly stance towards cryptocurrencies, if the economy improves, he might be more willing to embrace crypto technology to attract investments, such as promoting digital asset regulatory reforms and approving more compliant products.
Conversely, if the trade war remains prolonged or worsens, the global economy might fall into recession with traditional financial markets stagnating. In such an environment, cryptocurrencies will likely decline alongside risk assets in the short term. However, after this baptism, Bit may have an opportunity to re-prove its value storage function amid turbulence. When countries initiate competitive easing and fiat currency credit is damaged, Bit, as a scarce asset not affected by central bank over-issuance, might attract a new round of funding.
Six, Conclusion
In the short term, tariff policies will have a slightly negative impact on the crypto market, with the market struggling to find a bottom amid risk-averse sentiment. In the medium term, the impact will depend on the trade war's evolution and the effectiveness of macroeconomic hedging policies, with the crypto market likely maintaining high volatility and consolidation. In the long term, it will drive the global economic and financial system in a new direction, during which Bit and overall crypto assets may obtain unexpected strategic opportunities.
Regardless of the outcome, this round of tariff impact provides the crypto industry an opportunity to test its resilience: whether Bit can truly become "digital gold" will be tested over a longer cycle. If the global economy tends towards fragmentation due to protectionism, Bit has the potential to become a value anchor and hedging tool connecting different economic systems.
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