Since Donald Trump assumed office, his aggressive tariff policies have placed pressure on global stock and crypto markets. The intensifying trade relations particularly affect China, Canada, and Brazil, allowing experts to forecast potential downturns.
What Are Tariffs and Reciprocal Tariffs?
Reciprocal tariffs are an agreement between two countries to mutually benefit each other with trade duties. Tariffs are taxes on imported goods that affect inflation, business profits, and good prices. An increase in tariffs can lead to higher inflation in the economy. In such environments, investors shy away from risky investments, choosing safer ones like bonds and savings, leading to a market downturn. During the 2018 U.S.-China trade war, Bitcoin fell about 27% amid market volatility.
Tariffs Can Lead to Greater Market Crash
Trump's tariff maneuvers have the potential to incite a global trade war if countries retaliate against reciprocal tariffs. The average U.S. tariff rate with announced increases is nearing 8%, the highest since 1970. This could make goods more expensive for consumers and heighten tensions between trading partners. A Tax Foundation report suggests raising tariffs reduces economic growth and lowers the available quantities of goods and services for businesses and consumers. Policy uncertainty is rising, contributing to market volatility.
What's the Long-term Impact on Crypto Markets?
The long-term outlook for crypto markets might differ. Trump's administration, which has shown crypto-friendly policies, announced plans for a national cryptocurrency stockpile in January 2025. While the tariff hike may cause short-term panic, long-term prospects could be promising due to regulatory clarity and U.S.'s crypto-friendly posture.
The immediate impact of Trump's tariff policies on the crypto market appears potentially negative, with market uncertainty already causing significant volatility and value loss across major cryptocurrencies. However, the long-term outlook may be more optimistic for crypto markets, as the administration has signaled pro-cryptocurrency positions, including regulatory clarity and plans for a national cryptocurrency stockpile. While short-term market turbulence seems likely amid escalating trade tensions and policy uncertainty, these same policies might ultimately create a more favorable environment for cryptocurrency growth once immediate economic responses stabilize.
