April 2025 marked the announcement of new reciprocal tariffs by Donald Trump, heightening global trade tensions. These measures could impact the U.S. economy by raising inflation and slowing GDP growth.
From New Tariffs to Economic Impact
China International Capital Corporation (CICC) issued an analysis of Donald Trump's 'Liberation Day' tariffs announced on April 2, 2025. The tariffs introduce a 10% minimum levy on all countries, with higher rates for specific nations. CICC warns that the U.S.'s effective tariff rate could rise from 2.4% in 2024 to 25.1%, surpassing the Smoot-Hawley Tariff Act levels of 1930. The changes raise market concerns and the risk of stagflation in the U.S.
Impact on Financial Markets
The anticipated tariffs could boost PCE inflation by 1.9 percentage points, potentially reducing real GDP growth by 1.3 percentage points according to the CICC Report. These scenarios present significant challenges for the Federal Reserve, especially in regard to interest rate decisions. Stock markets experienced sharp selloffs following the announcement, with indices such as the S&P 500 and Nasdaq witnessing declines. Currency fluctuations were marked by a strengthening Japanese yen, while the euro and commodity-linked currencies weakened against the U.S. dollar.
Crypto Market Reaction
Amidst global uncertainties, Bitcoin's market remains volatile. As of April 3, 2025, Bitcoin is priced at $83,127.84, experiencing a -2.13% decline over 24 hours, with a 75.10% increase in trading volume, according to CoinMarketCap. Analysts highlight that the Federal Reserve's limited response options due to potential stagflation could inadvertently increase demand for cryptocurrencies as alternative 'safe haven' assets.
Donald Trump's new tariffs pose significant challenges for the U.S. economy and could lead to major shifts in financial and cryptocurrency markets. These actions increase uncertainties and require close observation of the economic situation.
