President Trump’s stance on cryptocurrencies may have been a boon for the crypto market after his election as 47th President, but in more recent months, another aspect to Trump’s agenda has had the opposite effect on prices. We’re talking, of course, about Trump’s aggressive tariff policies, particularly those announced earlier this month.
However, while the dust has yet to settle, and uncertainty regarding tariffs, and their impact on global trade, remains high, it’s not as if Bitcoin and other cryptos are doomed to experience further price turbulence.
Taking a closer look at the tariffs, as well as possible aftereffects of their implementation, this recent macroeconomic development could turn out to be a positive catalyst for this asset class. Binance CEO Richard Teng recently commented on this current macro uncertainty and its affect on crypto markets, “The resurgence of trade protectionism is introducing significant volatility across global markets — and crypto is no exception. In the short term, this kind of macro uncertainty tends to trigger a risk-off response, with investors pulling back as they wait to see how things unfold around growth, policy, and trade. Looking further ahead, though, this environment could also accelerate interest in crypto as a non-sovereign store of value. Many long-term holders continue to view Bitcoin and other digital assets as resilient during periods of economic stress and shifting policy dynamics.”
‘Liberation Day,’ the ‘Tariff Tumult,’ and the Recent Crypto Sell-Off
Within days of re-entering the White House, President Trump began to implement changes to U.S. trade policy, fulfilling promises made on the 2024 campaign trail. These initial tariffs include increases to duties on imports from Canada, China, and Mexico.
However, it wasn’t until April 2, which Trump coined “Liberation Day,” that he announced reciprocal tariffs that represented the largest tariff hike in nearly a century. Not only did Trump announce a massive increase in tariffs on goods from China (from 20% to 54%), undoubtedly America’s top trading adversary.
Trump announced big tariffs on imports from America’s other top trading partners, most of whom have strong, positive diplomatic relations with the United States. The baseline tariff on foreign goods was set at 10%, but countries like Japan (24%), Switzerland (32%), and Vietnam (46%) were hit with even higher tariffs.
Given the potential impact of these tariffs on U.S. and global economic growth, “Liberation Day” not surprisingly triggered a wave of “risk off” sentiment in global financial markets. While equities have experienced a sharper decline since the announcements, crypto has sold off as well, adding to the heavier price declines this asset class experienced relative to stocks during February and March.
Fear and Uncertainty Still Loom Despite Partial Relief
The tariff-induced shift from “risk on” to “risk off,” causing a massive outflow of capital out of assets like stocks and crypto, and into “safe havens” like bonds and gold, took a breather on April 9, when Trump announced a 90-day pause on all recently-implemented tariff hikes, except for those imposed on Chinese goods.
This surprise move led to a massive relief rally for equities, including a 12.16% one-day increase for the Nasdaq 100 index. The prices of cryptocurrencies also experienced a strong rebound. Bitcoin prices surged 8.3% on the tariff pause news, with altcoins like Ether and Solana bouncing back by around 13%.
However, fear and uncertainty related to these tariffs continue to loom. A further extension of this pause, or more positively, a reversal of these tariff hikes, hinges on successful negotiations between the U.S. and its trading partners. Moreover, not only have the high tariffs on China been kept in place.
In response to retaliatory tariffs from China in response to the initial tariff hike, Trump has imposed an additional 50% tariff on Chinese goods, raising total duties to a staggering 104%. Yet while tariff-related headwinds still haven’t gone away, there may be a silver lining for crypto investors, in the event trade tensions escalate, and a trade war persists.
What This Means for Crypto Prices Moving Forward
Even if the Trump tariffs aren’t going away, this may not necessarily translate into a sustained impact on the price of cryptocurrencies. For instance, if the Federal Reserve and other central banks respond to tariff hikes with interest rate cuts, this could benefit crypto in many ways.
Lower rates would be bullish for risk assets like crypto. Furthermore, dovish action from the Fed could lead to further high inflation. This in turn could shift market sentiment, back to a view that regards cryptocurrencies, especially Bitcoin, as a “safe haven” asset.
Nevertheless, while recent events could prove bullish for crypto in the long-term, expect further volatility in the near-term. With this in mind, your best move is to keep an eye on macro developments, as subsequent news is likely to drive further sharp moves higher and/or lower.
