Author: FinTax

Introduction

One of Trump's core economic strategies is tough foreign trade. During his first term, the Sino-US trade war with tariffs at its core attracted global attention. Now that Trump has returned to the White House, his trade protectionist stance has become increasingly tough, and the measures to impose tariffs have once again become the focus. This will inevitably cause global trade frictions again, leading to a series of economic chain reactions, which will in turn cause economic fluctuations and even regional thermal conflicts. This uncertainty will also profoundly affect the crypto market. This article will review Trump's tariff increase measures during his term and explore its potential impact on the crypto market and its possible response strategies.

1. Trump imposes tariffs Overview 1.1 Trump imposes tariffs in 2018 1.0

On March 23, 2018, Trump signed a trade memorandum with China, announcing that it would impose tariffs on $60 billion of goods imported from the United States and restrict companies from investing and mergers and acquisitions with the United States, and the Sino-US trade war officially broke out. Since then, the United States has continuously expanded its tariff scope, including both high-end manufacturing and daily consumer goods, involving aerospace, industrial machinery and equipment and its parts, motor vehicles, automobiles and their parts, electronic products, etc., as well as clothing and home furnishings, such as luggage, furniture, lamps and other daily consumer goods. Among them, the imposition of tariffs on electronic products will pose a threat to mining machine manufacturers. For example, Bitmain, which once occupied 90% of the Bitcoin mining machine market, was greatly affected by Trump's tariffs in 2018, and moved some production lines from Southeast Asia. In addition, the United States has also taken tariff actions against many regions around the world. Its core goal is to reduce trade deficits and protect industries through tariff means, which has also triggered other tariff retaliation measures taken.

1.2 Trump imposes tariffs in 2025 2.0

On January 20, 2025, Trump signed the U.S. First Trade Memorandum, emphasizing the importance of protecting the U.S. economy and security, including improving the trade deficit, investigating unfair trade practices, strengthening economic and trade relations, evaluating export control measures, and ensuring the interests of American workers and manufacturers.

Since then, the United States has implemented new tariff measures against multiple ones. First, a 10% tariff was imposed on all imported goods from , and then announced an additional 10% increase in tariffs, which came into effect on March 4. The cumulative tariff rate of the United States imposed on China has risen to 20%. Combined with the 25% tariff in the previous Article 301, the comprehensive tax rate of some key technological equipment (such as servers, storage devices, semiconductors) may be as high as 45%-70%, which will have a significant impact on the encryption industry. And a 25% tariff is also imposed on Canadian and Mexican goods. At the same time, US Treasury Secretary Becent said that specific reciprocal tariffs will be allocated to each trading partner. In addition to specific and regional tariffs, Trump also plans to adopt tariff measures for specific products, such as agricultural products, wood, steel and aluminum, automobiles, copper, semiconductors and medicines.

Trump said in his campaign that he hopes Bitcoin will be "mined, minted and manufactured" in the United States, and that its tariff measures will inevitably involve the crypto industry. For example, in January, the U.S. Department of Commerce Bureau of Industry and Security (BIS) updated its export controls on advanced computing semiconductors, while also adding some entities in Singapore to the entity list. These regulations target chips that use "16nm/14nm node" and below processes, and even strengthen due diligence on foundries, which will inevitably affect mining machine manufacturers.

2. The potential impact of Trump's tariff imposition on the crypto market 2.1 Impact on the entire crypto market

In the short term, Trump's tariff imposition measures have had a negative impact on the crypto market. In January, Trump signed an executive order requiring the establishment of a working group to establish clear rules for US cryptocurrency companies within six months and study the establishment of potential cryptocurrency reserves to support the development of cryptocurrencies. After the news was announced, the total market value of cryptocurrencies increased to US$3.65 trillion at the end of January, a cumulative increase of 9.14%. But in February, the tariffs announced by Trump immediately offset the positive effects of the aforementioned executive order, triggering a series of negative chain reactions in the cryptocurrency market. Especially on February 3, after Trump announced the implementation of long-term import tariffs on Canada, Mexico and the cryptocurrency market showed a trend of downward trend in synchronizing with the stock market. Bitcoin plummeted 8% in 24 hours, Ethereum fell by more than 10%, and the total amount of liquidated positions in the entire network exceeded US$900 million, and 310,000 investors were forced to close their positions. Behind this market volatility is investors' panic about the escalation of trade frictions and concerns about the global economic outlook.

From a macroeconomic perspective, trade frictions will lead to global market volatility, and the attractiveness of the US dollar as a safe-haven asset will be further enhanced. Funds will flow back to the United States, enhancing the strength of the US dollar, and exacerbating the fluctuations in the global capital market. Investors' risk appetite for high-volatility assets has declined, and cryptocurrencies have been sold in large quantities. Large funds and venture capital firms can also cause market volatility. If their equity position drops, they may clear crypto positions to manage risk. At the same time, tariffs may also trigger inflation, weaken consumer purchasing power, and further curb economic growth. In this context, investors generally turn to safer asset classes, and cryptocurrencies, as high-volatility assets, will naturally become the target of selling earlier, resulting in a significant decline in their prices and a decline in sentiment in the crypto market.

However, in the long run, Trump's tariffs may still have a positive impact on the crypto market, including the following aspects:

First, the tariffs imposed by the United States may increase market liquidity. While implementing tariffs, Trump will adopt expansionary fiscal policies domestically, such as large-scale tax cuts and expansion of infrastructure investment. These may boost the U.S. economy in the short term, but will also intensify the fiscal deficit. To fill the funding gap, the market may be increased by issuing bonds or monetary easing.Liquidity, which will provide a favorable environment for the cryptocurrency market. For example, in 2020, the Federal Reserve expanded its balance sheet by more than $3 trillion, and Bitcoin rose by more than 300% during the same period.

Secondly, tariffs push up prices of imported goods, while the depreciation of the US dollar may drive capital flows to crypto markets. Eugene Epstein, head of trading and structured products at Moneycorp, said that if the trade war causes inflation to weaken the dollar, Bitcoin may instead benefit. Because in the long run, under the trend of US dollar depreciation, global investors may seek other assets to hedge the risk of US dollar depreciation, and investors may switch to investing in fixed-scale anti-inflation assets such as Bitcoin to hedge the risk of fiat currency depreciation. In addition, some others may choose currency depreciation to deal with the tariff shock, and cryptocurrencies may also become a channel for capital outflows.

Finally, trade conflicts may intensify the trend of de-dollarization, and the intensification of the trust rift between the tariff trade wars, prompting countries to reduce their dependence on the US dollar. For example, Russia and the US dollar have been gradually reduced in international trade, and the Middle East has also begun to try to use RMB or other currencies for energy settlement. In 2022, Iran will use Bitcoin mining to circumvent oil export sanctions. This de-dollarization trend will drive the demand for cryptocurrencies from global capital and bring new development opportunities to the crypto market.

2.2 Impact on investors

On the one hand, investors have to optimize their investment portfolio. Cryptocurrencies are still considered speculative or high-risk/high-volatility asset classes. In the context of tariffs escalating trade frictions, investors may need to revisit their portfolios, reduce their exposure to volatile assets, lower the investment proportion of venture capital such as cryptocurrencies, and ensure that the proportion of assets in cash, treasury bonds or other secure investment categories is appropriate.

On the other hand, frequent changes in Trump's tariffs affect investors' stable expectations and investors' investment confidence. Trump declared himself “a president who supports innovation and Bitcoin” during his presidential campaign, announcing a package of cryptocurrency support. Before he was about to take office as US president for the second time, he publicly issued his personal meme currency "Trump Coin ($Trump). After taking office as president, he also sent out signals of supporting cryptocurrencies, including setting up a working group to study regulatory frameworks and crypto asset reserve plans. But the macro risks caused by tariffs offset the market's expectations for good news. Since February, Trump has introduced comprehensive tariff measures to, Canada and Mexico. The tariff offensive is almost crazy, and the related is capricious. The news of hasty announcements has brought chaos to the economy and financial markets. This uncertainty has brought challenges to all parties trying to make decisions, causing market concerns. Investors' confidence may be hit and they have to choose to sell cryptocurrencies or reduce new investments.

2.3 Impact on related companies

Trump's tariffs have a multifaceted impact on crypto companies, especially upstream and downstream mining companies. First, closeTax will affect hardware imports, the cost of mining machine manufacturers to obtain key components increases, the production cost of mining machines increases, affecting their profitability, and research and development will also be hindered to certain extent. Second, in the short term, the supply of mining machines may be short, prices will rise, and the cost of mining pool operators and mining companies to update equipment will increase, which will also significantly increase their operating pressure. Third, in the long run, tariffs may cause mining machine companies and mining companies to migrate to areas less affected by the trade war, changing the geographical distribution of crypto companies around the world.

Secondly, tariffs will have an impact on the exchange. First, tariffs could lead to global trade tensions, stock market fluctuations or rising economic uncertainty. Against this background, some investors may regard cryptocurrencies as hedging tools, with increased trading volumes and attract more short-term traders to enter the cryptocurrency market, and exchange trading volume and fee income may rise in the short term. Secondly, tariffs may trigger capital controls or foreign exchange restrictions, and cryptocurrencies may become an alternative channel for cross-border capital flows, driving the growth of deposit and withdrawal demand for exchanges. Finally, Trump may be accompanied by tariffs to adjust the financial regulatory framework and strengthen scrutiny of cryptocurrencies, such as anti-money laundering, tax compliance, etc., and the exchange's operating costs and compliance pressure may increase.

Lastly, tariffs will also affect the stablecoin market. In order to maintain profits, companies will inevitably want to seek other alternatives to bypass tariff barriers, and stablecoins may become one of the options. In areas with strict capital controls such as Asia and Latin America, USDT is the main tool to circumvent US dollar exchange restrictions. If tariffs cause emerging market currencies to depreciate (such as RMB, etc.), local users may increase their holdings of USDT to hedge risks, thereby pushing up demand for USDT; but if US sanctions involve entities using USDT, they may threaten their liquidity. Due to its high compliance, USDC is more used in traditional institutional deposits and compliant DeFi protocols. If U.S. companies turn to cryptocurrency payments due to increased tariff costs, USDC may become the preferred settlement tool; if market risk aversion continues to heat up, institutional investors may also regard USDC as a "safe stablecoin" and squeeze out USDT's share.

3. Response strategies of all parties 3.1 Encryption market overall level

Tariff threats will trigger a trade war panic and trigger a periodic risk aversion, but this panic is generally characterized by short-term characteristics. Historical experience shows that, for example, in the tug-of-war period of Sino-US trade in 2018, the market's stress response to sudden tariffs usually undergoes three-stage evolution of "panic-digestion-repair". They will initially fall into panic, but over time, the market can often gradually adapt and return to stability. The market usually has strong self-regulation ability and relies on historical experience and laws to form stable expectations. Although this tariff has caused short-term fluctuations in the market, in the long run, as mentioned above, it will not cause fundamental changes to the market. The crypto market will continue to attract investors who are optimistic about their development potential, and these investors will buy on dips when market prices fall, providing the market withStable support.

3.2 Enterprise level

First, for crypto companies whose tariffs will affect their production and operation activities, they can consider expanding suppliers in other areas that are not affected by tariffs, such as Southeast Asia, to avoid a single dependence on the United States or supply chain. Moreover, under the pressure of tariffs, they can consider setting up production bases in the United States, Russia, etc. to reduce the impact of import tariffs. Secondly, international traders and crypto companies can flexibly adopt stablecoins for settlement, reduce the impact of trade on cross-border payments, and even use DeFi protocols to reduce the traditional financial restrictions caused by trade barriers. Again, crypto companies can avoid uncertain tariff and regulatory risks by setting up overseas subsidiaries and using offshore financing methods (such as Singapore and Dubai). Finally, crypto companies should also pay attention to compliance construction, pay attention to communication with departments, and actively protect and fight for their own rights and interests.

3.3 Individual investor level

First, investors can diversify their assets and pay attention to risk management. In addition to investing in cryptocurrencies, you can also invest in traditional assets such as stocks, bonds, and gold, because when the cryptocurrency market fluctuates greatly, other assets can hedge the investment risks of cryptocurrencies and improve the stability of asset allocation. Second, investors can establish the concept of long-term investment ("HODL"), and do not blindly chase ups and downs, but can patiently wait for the market to rebound and the right time to enter. Third, by paying attention to industry trends and trends and understanding relevant information, investors will also make smarter investment choices. Fourth, even if you unfortunately suffer investment losses, individual investors can minimize losses through pre-tax capital loss deductions and other methods. For example, under U.S. tax laws, any realized capital loss can be used to offset similar capital gains or ordinary income, which helps save investors large tax expenses in crypto markets with uncertainty. However, it should be noted that this type of tax calculation is often more cumbersome and highly professional.

4. Summary and Outlook

Trump's tariffs are a direct manifestation of trade protectionism and have also had a direct or indirect impact on the crypto market. In the short term, the tightening of liquidity caused by the imposition of tariffs will trigger a simultaneous decline in the crypto market; but if the tariffs continue, it may accelerate the decentralized transformation of the crypto industry in the long term, promote stablecoins to become a new medium for cross-border trade, have positive impacts, and give birth to more compliant crypto financial products. In the current context, enterprises and individuals can flexibly formulate strategies to deal with tariff shocks, grasp structural opportunities from negative impacts, and adjust risk aversion needs in economic fluctuations, thereby achieving the optimal solution to their own benefits.