In recent months, the crypto market faces changes amidst the tariff wars, significantly affecting the global economy.
Tariffs as a Catalyst for Economic Contraction
Tariffs function as taxes on imported goods aimed at protecting domestic industries, but they drive up prices, reducing consumption that accounts for approximately 68% of US GDP. The imposition of tariffs may lead to a recession, decreased employment, and unfavorable economic outcomes for neighboring countries like Canada and Mexico.
The Trade War Escalation and Its Broader Impact
Many experts expect the introduction of tariffs to negatively impact international trade, increase production costs, and drive up prices. Last week, the associated volatility was evident in the crypto market. Trump's decision to delay tariffs for Canada and Mexico temporarily stabilized Bitcoin's price, only for it to drop again with China's retaliatory tariffs.
Inflation Risks and Federal Reserve Dilemma
The Federal Reserve is concerned about the inflationary consequences of large-scale tariffs. The scenario of accelerated inflation can exacerbate recessionary pressures by reducing consumer spending. The Federal Reserve faces a dilemma of controlling inflation without worsening economic downturns.
The coming weeks will be crucial for the US economy and its partners. Continuing aggressive tariff policies could trigger inflation and recession, adversely impacting global markets and consumer confidence.
