Trump Tariffs and Its Impact on the Crypto Market

Bittime - US President, Donald Trump, announced a new tariff policy or Trump Tariffs against Canada, Mexico and China. This decision triggered a market reaction towards stocks and crypto assets. How will the Trump Tariff impact the crypto market? Here's the review.

Since the announcement, the value of Bitcoin and Ethereum has fallen drastically, while massive liquidations reached more than $2.1 billion (around IDR 34.23 trillion). 

However, are these concerns excessive? And how will this policy impact the crypto market in the future? Let's discuss it in more depth.

What Are Trump Tariffs?

Trump Tariffs refers to the import tariff policy implemented by Donald Trump during his leadership and is now being reintroduced. 

This policy imposes a 25% tariff on most imported goods from Canada and Mexico and 10% on imported goods from China. 

This step is claimed to be a strategy to suppress the flow of fentanyl entering the US through international trade routes, while protecting the domestic industry from global competition.

Read also: The US Trade War and Its Impact On Bitcoin, XRP, and ETH

However, this policy is not without controversy. Many economists and business people warn that increasing rates could lead to inflation. 

Apart from that, these experts also argue that this decision could hamper economic growth and trigger a wider trade war with the US' main trading partner countries.

The Impact of Trump Tariffs on the Global Economy

Trump's policy regarding new tariffs immediately shook financial markets. The Dow Jones Industrial Average (DJIA) fell 1.2%, while the S&P 500 and Nasdaq plunged 1.9% and 2.7%, respectively. 

In addition, the value of the US dollar soared against other currencies, causing weakness in global markets, including the euro and the Canadian dollar.

Other impacts include:

• Rising Inflation: As import costs rise, prices of consumer goods in the US will likely rise. This can reduce people's purchasing power and put pressure on the economy as a whole.

• Supply Chain Disruptions: Many US companies depend on imported raw materials and components. Higher tariffs could cause production disruptions and increased operational costs.

• Retaliation from Other Countries: Canada and Mexico have announced retaliation by imposing equivalent tariffs on US products worth $155 billion (around IDR 2.52 quadrillion). China also plans to challenge this policy to the World Trade Organization (WTO).

Read also: Bitcoin Price Analysis: Can BTC Rebound?

The Effect of Trump Tariffs On Crypto Markets

The impact of Trump's policy is not only felt in the stock market, but also in the crypto market. Some visible effects include:

1. Massive Liquidation

In the 24 hours after the tariff announcement, more than $2.1 billion (around Rp. 34.23 trillion) in crypto assets underwent liquidation. 

Bitcoin fell to $96,300 (around IDR 1.57 billion), while Ethereum fell to $2,800 (around IDR 45.64 million).

2. Increased Volatility

The previously stable crypto market is experiencing a spike in volatility. Bitcoin's implied volatility in the last 30 days rose 4% to 54%, reflecting investor uncertainty regarding US economic policy.

3. Changing Market Sentiment

Some analysts believe that this spike in volatility is only temporary. Ryan McMillin of Merkle Tree Capital said that the market has bottomed out and will likely recover once the negative sentiment subsides.

4. Long Term Impact

If tariffs remain in place over the long term, investors may begin to view cryptocurrencies as a hedge against inflation and economic uncertainty, such as has occurred during the COVID-19 pandemic.

Conclusion

Trump Tariffs are again a factor that shakes global markets, including the crypto market. While the impact on crypto appears significant in the short term, some analysts believe that this volatility could be an opportunity for long-term investors. 

With increasing global economic pressures, digital assets may gain more traction as a hedge against uncertain economic policies.

Read also: Token Unlock XRP: Ripple Releases 400 Million Coins to the Market, What Does This Mean for Investors?

FAQ

1. Do Trump Tariffs Have a Direct Impact on Crypto?

Yes, this policy triggered panic in the financial markets which had an impact on crypto assets. Massive liquidations and increased volatility show that investors still view crypto as a speculative asset.

2. Can Bitcoin Recover After This Drop?

History shows that Bitcoin often experiences sharp fluctuations before eventually recovering and reaching new highs. If economic pressure continues, Bitcoin could again be seen as a hedge asset.

3. How Should Crypto Investors Respond to Trump Tariffs?

Investors should remain calm and conduct in-depth analysis before making a decision. Portfolio diversification and risk management strategies can help weather market volatility.

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Also, visit the Bittime Blog for interesting updates and educational information about the crypto world. Find reliable articles about Web3, blockchain technology, and digital asset investment tips designed to enrich your crypto knowledge.

Reference 

CNN, Trump announces significant new tariffs on Mexico, Canada and China, sparking retaliatory actions, accessed February 3, 2025.

Decrypt, Trump’s Tariffs Shake Markets: Dow Futures Slide, Crypto Liquidations Top $2B, accessed February 3, 2025.

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