Author: Hotcoin Research

1. Introduction

After returning to the White House, Trump quickly fulfilled his tough promises about tariffs during the campaign, setting off an unprecedented tariff storm, which was described by the outside world as provoking a "tariff war 2.0", triggering violent shocks in the traditional financial market and cryptocurrency market. Bitcoin and the entire cryptocurrency market have experienced a sharp decline under this heavy pressure, and many crypto projects are facing difficult tests. This article will analyze the specific measures of Trump's new tariff policy, macro-conduction mechanism, the subsequent direction of US tariffs, and its far-reaching impact on the crypto market, and help investors fully understand the risks and opportunities.

2. Tariffs since Trump returned to the White House

February: Selling the tariff stick

(1) Targeting North America: On February 1, the United States announced an additional 25% tariff on all imported goods from Canada and Mexico (of which 10% tariffs are imposed on Canada's energy resources) to pressure the two countries to strengthen border security, immigration control and combat drug smuggling. Canada immediately announced a 25% retaliatory tariff on billions of US products, and Mexico plans to introduce retaliation measures.

(2) Target: On the same day, Trump announced an additional 10% tariff on all goods imported from the United States, which will take effect on February 4. The move was claimed to be a pressure to take action to curb the smuggling of drugs such as fentanyl into the United States. Trump also signed an executive order to cancel tax exemptions for low-value goods in Hong Kong (less than $800), that is, these small packages also require a new 10% tariff. These preliminary measures mark the beginning of Trump's new tariffs.

March: Tariff negotiations tug of war

(1) NAFTA tariff storm: On March 4, Trump officially imposed a 25% tariff on all goods produced in Mexico and Canada. Canada immediately announced a response to the simultaneous tariffs on U.S. products, and Mexico also said it would formulate retaliation measures, which triggered concerns about a new round of trade war. Just one day later, on March 5, Trump temporarily exempted tariffs on Canadian and Mexican cars for one month to ease the pressure on the three major U.S. automakers. On March 6, Trump signed an executive order, postponing the implementation of tariffs against Mexico and Canada until April 2 in order to continue negotiations. Canada and Mexico therefore suspended their original countermeasures. Despite a brief ease, Trump turned to threaten to impose new tariffs on Canadian timber and dairy products on March 7, criticizing Canada for long-term high tariffs on U.S. agricultural products and said the United States would respond with reciprocal tariffs. Trump bluntly stated that "there will be more changes and adjustments in tariffs in the future." This series of repeated measures highlighted the radical and changeable tariffs, which shook the stable foundation of North American free trade relations in a short period of time.

(2) Return of steel and aluminum tariffs: Trump also resumed high tariffs on global steel and aluminum products in March. Starting from March 12, the United States will re-impose tariffs of 25% and 10% on imported steel (based on the safety reasons of Article 232), This is actually a "return" in which Trump implemented measures in his first term. In response, the EU has imposed retaliatory tariffs ranging from 4.4% to 50% on steel and aluminum products produced in the United States since April 1.

April: Tariff war escalates

Public tariffs on "Liberation Day": On April 2, Trump announced a new round of tough tariff measures at the White House, known as the "Liberation Day" tariffs. He signed two executive orders on "reciprocal tariffs":

(1) Universal taxation: From April 5, all imported goods around the world will be subject to an additional 10% "universal" tariff. This means that the United States has increased ad valorem tax on the vast majority of imported products, except for a few exemptions. The US-Mexico-Canada Agreement (USMCA) partners Canada and Mexico are temporarily exempted from the 10% universal tariff, and small-scale e-commerce parcels (<800 USD) are also temporarily suspended to reduce the impact on daily consumption.

(2) Reciprocal tax increase: For economies with a huge trade deficit with the United States, the United States imposes a higher reciprocal tariff rate on a 10% basis, effective from April 9. The specific and tax rates include: 34%, the EU 20%, Japan 24%, South Korea 25%, Taiwan 32%, India 26%, Thailand 36%, etc. At the same time, an additional 25% tariff will be imposed on all imported cars and parts, which will be implemented from April 3 to promote the "return" to the United States. This round of tariffs almost wiped out the world's major trading countries in one place, with unprecedented scope and high tax rates, which are described as dropping a "tariff nuclear bomb."

Source: https://www.bbc.com/

Such a drastic tariff increase undoubtedly triggered strong shocks around the world, and countries have expressed their countermeasures: On April 3, the EU and Canada clearly stated that they were "ready to take retaliatory measures", while Japan was eager to seek exemptions; on April 4, it announced the imposition of 34% tariffs to conduct reciprocal countermeasures. Subsequently, Trump threatened to add an additional 50%, plus the 20% previously collected, and the total amount rose to 104%. On the same day, countermeasures were announced, and from April 10, an additional 50% tariff will be added to all US imported goods, and the tariff rate will be increased to 84%. A comprehensive trade conflict between the United States and major economies represented by it has formed.

With less than 24 hours after the United States officially imposed high reciprocal tariffs on dozens of trading partners, Trump suddenly changed his position. On April 9, Trump said that in view of more than 75 representative agencies in the United States for consultations, he announced a suspension of the implementation of new tariffs for 90 days, during which general tariffs will be reduced to 10%, and the suspension measures will take effect immediately. The 90-day tariff suspension does not apply to U.S. tariffs against Mexico and Canada. At the same time, tariffs on goods will be increased from 104% to 125%.

3. Tariffs Conveyors that affect the crypto market

Trump's new tariffs NoIt has only changed the international trade pattern and has also influenced the cryptocurrency markets such as Bitcoin through multiple macroeconomic channels. As an important macro tool, tariffs will have a chain reaction in economic growth, inflation, capital flows, exchange rates and market sentiment, and then transmit to crypto asset prices. The specific mechanisms are as follows:

Economic slowdown and inflation concerns: Large-scale tariffs are equivalent to raising taxes on imported goods, directly pushing up costs for enterprises and consumers. This will raise inflationary pressures and drag down economic growth. The rise in inflation expectations and economic slowdowns are a red flag for the market, and investors often turn to traditional safe-haven assets. As tariff uncertainty rises, investors have favored emerging assets such as gold over Bitcoin this year: international gold prices once broke through the all-time high of $3,150 per ounce in early April. Although Bitcoin is regarded as anti-inflation "digital gold", market performance shows that its speculative attributes temporarily overwhelm the safe-haven attributes, and the risk-haven demand caused by inflation mainly flows to traditional assets such as gold.

Dollar liquidity tightening and realizing demand: The trade war disrupts global supply chains and trade exchanges, which may lead to a tightening of US dollar liquidity. A decline in imports and exports will reduce the supply of US dollar under trade, and trade uncertainty makes companies and investors more inclined to hold cash and increase demand for US dollar. In this case, some institutions and investors may be forced to cash in on assets to raise US dollar cash. , some investors in a sharp drop in the stock market may sell their cryptocurrency positions in exchange for cash. Such selling pressure has exacerbated the downward trend of the currency price. Risk aversion may also push up the dollar exchange rate, putting pressure on the price of Bitcoin denominated in US dollars. At present, the market expects the Federal Reserve to cut interest rates earlier to support growth under the impact of tariffs, which has driven US Treasury yields to plummet (US 10-year Treasury bond rate fell by 20 basis points after tariff news). Changes in interest rate expectations also affect capital allocation preferences: safe-haven funds flow into bond markets and US dollar assets, relatively weakening their willingness to allocate high-risk assets.

Stock risk preferences and sentiment changes: Large-scale tariffs are regarded as major negative news, which directly shakes the risk preferences of global investors. Trade tensions caused by Trump's tariffs have soared market uncertainty, and investors tend to "sell first and wait and see". The decline in the stock market is highly positively correlated with the decline in Bitcoin. According to TradingView data, the correlation coefficient between Bitcoin price and the S&P500 index is as high as 0.66, which shows that under the severe risk shock, Bitcoin is currently regarded as a risk asset rather than a safe haven by the market. The uncertainty brought about by tariffs has also weakened optimism in the previous market. Trump once released a crypto-friendly signal to cryptocurrency in his campaign and early in his tenure, causing Bitcoin to soar to a high of about $109,000 by the end of 2024. However, the cloud of tariff wars quickly shrouded. As the trade prospects deteriorated and the downward pressure on the economy increased, market risk aversion prevailed, and the previous upward momentum of crypto assets declined significantly.

Source: https://newhedge.io/bitcoin/us-equities-correlation

Historical trends and changes in crypto asset positioning: crypto markets’ response to trade conflicts is different from a few years ago. When Trump first launched a trade war in 2018, some investors regarded Bitcoin as a tool to hedge uncertainty, pushing its price to soar from its low of about $3,700 to 13,000 from that year's low of about $3,700 to 13,000. $0, staged a "front-wind" market. However, the current market is more mature and more connected with the mainstream market. In this round of tariff shock in 2025, Bitcoin did not repeat its strengthening performance in 2018, but instead fell with stocks. This shows that Bitcoin's investor structure and market positioning are changing: the proportion of institutional investors increases, and trading behavior is more like risky assets such as technology stocks, rather than operating completely independently. This change also highlights the increased integration of the crypto market in the global financial system.

IV. Tariffs Analysis of the performance of crypto market after release

Trends of Bitcoin and crypto markets in the first quarter of 2025 and Trump tariffs The pace is highly correlated, and the changes in trading volume and capital flow also reflect that investors' sentiment has shifted from optimism to prudentness. Under such macro pressure, the crypto market has entered a sluggish adjustment stage in the short term.

Optimism cooled down in February: From the end of 2024 to the beginning of 2025, with Trump's election and claiming to support digital assets, Bitcoin continued the bull market of the previous year, once standing above the 100,000 US dollar mark. However, with 2 The news of tariffs at the beginning of the month has been reported, and the price of Bitcoin quickly turned to a decline, and the cryptocurrency market has begun to fall sharply. By the end of February, the price of Bitcoin had fallen by about 28% from its January high, falling into the technical bear market. Throughout February, the total market value of cryptocurrencies in the global market shrank by more than $1 trillion. It can be said that the cryptocurrency market experienced a "cooling" in the first round of tariff storm.

March oscillation: Entering March, Trump Tariffs on Mexico, Canada and steel and aluminum products After twists and turns, market sentiment recurred. After the news that North American tariffs came into effect and were postponed in early March, Bitcoin repeatedly tug-of-war around the price of over 80,000. On the one hand, the measures to suspend tariffs on allies brought some comfort to the market, and risky assets rebounded briefly; on the other hand, Trump's frequent tough statements made investors afraid to enter the market. Throughout March, the price of Bitcoin was generally in the $75,000-$90,000 zone

The "Liberation Day" tariffs triggered a sharp shock in April: In early April, the news that Trump officially signed the executive order of comprehensive tariffs became the fuse, triggering a new round of market fluctuations. On the day the comprehensive tariff plan was announced on April 2, the price of Bitcoin first changed in a short-term trend - and it once instantly rose to about $87,400. Some funds seemed to misread it as a buying order driven by positive inflation, but then took a sharp turn and fell to $82,0Around 00, the intraday amplitude exceeds 6%. As of April 9, Bitcoin continued to decline, and its price fell sharply to $74,508, the lowest point this year.

Source: https://www.hotcoin.com/en_US/trade/exchange

According to CoinMarketCap data, on the day of the tariff announcement on April 2, global cryptocurrency-related investment products (such as ETFs) experienced a net outflow of approximately US$8.6 billion, of which the net outflow of Bitcoin ETFs in a single day was as high as US$8.7 billion. This shows that institutional funds were quickly withdrawn and avoided risks when the news was announced. Additionally, the entire cryptocurrency market's market value evaporated by about $500 billion in the week of tariff news disturbances. At the same time, CME Bitcoin futures holdings fell, suggesting that some institutional investors have reduced their risk exposure. All of the above signs indicate that in the hedging environment caused by tariffs, funds are flowing out of the crypto market in stages, and intra-market liquidity is becoming tight.

5. Tariff trend and crypto market outlook

At the beginning of 2025, the world economy was already in a situation of slowing growth and falling inflation. Inflation has cooled down after the 2024 interest rate hike cycle, but growth momentum has weakened, and the European economy is hovering on the brink of stagflation, and emerging markets are striving to recover. The outbreak of a comprehensive trade war at this time is tantamount to adding shadow to the fragile recovery prospects.

5.1 Future U.S. tariff trends

Trump may use extreme pressure as a bargaining chip to moderately reduce some tariffs in exchange for results after forcing trading partners to make concessions. For example, tariffs on Canada and Mexico may be cancelled or reduced after an agreement between the two sides on immigration drugs; tariffs on automobiles on the EU may be put on hold through new trade negotiations; tariffs on China may be subject to certain "phase cancellations" in exchange for expanding procurement or opening up markets.

Trump stressed that tariff revenue can be used to support industries and infrastructure, and may eventually make a slight correction to tariffs on some commodities through negotiations, but high tariffs in key areas such as new energy and semiconductors are expected to solidify for a long time. If the economy deteriorates significantly in the second half of 2025, it is not ruled out that Trump is forced to adjust his tariff strategy.

5.2 Impact of U.S. tariffs on currency

Amid the impact of tariffs, the deteriorating growth prospects are believed to force the Fed to relax earlier than originally planned. Investors expect the Fed to start cutting interest rates in the second half of 2025. Analysis by JPMorgan Private Bank pointed out that the market expects the Federal Reserve to lower interest rates to around 3.5% by the end of the year, and believes that growth risks will overwhelm inflation risks become the main driver of lower yields. However, on the one hand, the trade war has caused concerns about recession, and on the other hand, inflation driven by tariffs has limited the central bank's room for relaxation. This dilemma increases uncertainty in market prospects.

If the tariffs are maintained for a long time, high import taxesIt is equivalent to the United States exerting a stagflation impact on its own economy. If all relevant taxes are implemented, the price boosted may put the Fed in a dilemma: interest rate cuts may stimulate inflation and asset bubbles, and the economy will not lower interest rates and will be under great downward pressure. If trade negotiations progress and tariffs are partially lifted, growth expectations are expected to be improved and inflationary pressures are alleviated. The Fed's interest rate cut space will be opened, and liquidity improvement will benefit all kinds of assets, including Bitcoin.

5.3 Future U.S. tariff trend and potential impact on the crypto market

If trade tensions can be alleviated in the short term and global risk appetite rebounds, cryptocurrencies may also usher in a new round of rising market. Especially if the Fed can successfully cut interest rates or even re-expand balance sheets to release liquidity, then Bitcoin and Ethereum, which have undergone deep adjustments, are expected to strengthen again. Given Trump's personal and his team's relatively friendly stance on cryptocurrencies, if the economy improves, Trump may be more willing to embrace crypto technology to attract investment, such as promoting digital asset regulatory reforms, approving more compliant products to market.

In contrast, if the trade war persists and even worsens, the global economy may fall into recession and traditional financial markets are sluggish. In this environment, cryptocurrencies will still fall together with risky assets in the short term. But after baptism, Bitcoin has the opportunity to re-prove its store of value function in amidst turmoil. When countries start competitive easing and the credit of fiat currency is damaged, Bitcoin, as a scarce asset that is not affected by the abuse of central banks, may gain a new round of favor from funds.

6. Conclusion

In the short term, the impact of tariffs on the crypto market is negative, and the market is struggling to find a bottom in risk aversion; in the medium term, the impact will depend on the evolution path of the trade war and the effectiveness of macro hedging. The crypto market may maintain a high volatility and volatile bottoming pattern; in the long run, it will promote the development of the global economic and financial system in a new direction, and in this process, Bitcoin and the overall crypto assets may obtain unexpected strategic opportunities.

No matter what the result is, this round of tariff shock provides the crypto industry with an opportunity to test its resilience: whether Bitcoin can really become "digital gold" will be tested in a longer period of time. If the global economy tends to fragment due to protectionism, Bitcoin has the potential to become a value anchor and hedging tool connecting various economic systems.