On Saturday, President Donald Trump announced a sweeping set of tariffs aimed at the United States’ three largest trading partners: Canada, Mexico, and China. Effective Tuesday, the new policy imposes a 25% tariff on imports from both Canada and Mexico, as well as a 10% tariff on Chinese goods. The announcement, framed by Trump as a strategy to address border security and combat the ongoing fentanyl crisis, has sparked major ripples across global financial markets, particularly within the cryptocurrency space.
Economic Concerns and Consumer Impact
Economists have raised immediate concerns that these new tariffs could drive up consumer prices as businesses are likely to pass on the additional costs to consumers. This move, part of Trump’s broader effort to reshape U.S. trade relationships, is seen by some as an attempt to bolster American manufacturing. However, experts caution that the tariffs could fuel inflation and potentially spark a trade conflict with both neighboring countries and China, disrupting global supply chains and leading to job losses in various sectors.
Crypto Market Faces Immediate Fallout
The announcement has also triggered significant turbulence in the cryptocurrency market. Following the news, Bitcoin, the world’s leading cryptocurrency, plummeted below $100,000 for the first time in weeks. It continued its downward trajectory, eventually settling at around $92,000 by the end of the day. Ethereum followed suit, falling 24% to approximately $2,300, according to data from CoinGecko.
Within 24 hours, a staggering $1.7 billion in long positions were liquidated across various crypto assets. Ethereum traders bore the brunt of the losses, with $528 million in liquidations, while Bitcoin traders experienced $421 million in losses, according to data from Coinglass. Other major cryptocurrencies such as XRP, DOGE, ADA, SOL, and BNB also suffered steep declines, with XRP and DOGE seeing drops as high as 30%.
Could Tariffs Fuel Bitcoin’s Ascent?
Despite the immediate price drop, some analysts believe Trump’s new tariffs could lead to a longer-term surge in Bitcoin prices. Jeff Park, head of alpha strategies at Bitwise Asset Management, suggested that the tariffs might indirectly set the stage for a Bitcoin boom. By weakening the U.S. dollar and pushing inflation higher, Trump’s tariffs could prompt investors to turn to Bitcoin as a hedge against currency devaluation.
This is the only thing you need to read about tariffs to understand Bitcoin for 2025. This is undoubtedly my highest conviction macro trade for the year: Plaza Accord 2.0 is coming.
Bookmark this and revisit as the financial war unravels sending Bitcoin violently higher. pic.twitter.com/WxMB36Yv8o
— Jeff Park (@dgt10011) February 2, 2025
Park explained that the tariffs could exacerbate the Triffin Dilemma, where the U.S. must maintain trade deficits to supply the world with liquidity as the global reserve currency. In this scenario, a weaker dollar could boost Bitcoin’s appeal as an alternative store of value.
Bitcoin as a Global Hedge Against Inflation
The broader economic impact of these tariffs could drive countries to seek refuge in assets that are insulated from inflation and currency debasement. Bitcoin, often referred to as “digital gold,” could see increased adoption both within the U.S. and in other countries that face currency devaluation. The belief is that as inflation rises and local currencies lose value, citizens in affected nations may increasingly turn to Bitcoin as a safe haven for their wealth.
Park speculates that both sides of the trade imbalance—U.S. consumers and foreign nations—could seek refuge in Bitcoin, driving its price “violently higher.” While the immediate impact on crypto prices has been negative, the long-term effect could be a massive increase in Bitcoin’s value, with the digital asset emerging as a leading inflation hedge in a more fragmented global economic landscape.
The Road Ahead for Crypto and Trade Relations
The effects of these tariffs are still unfolding, and it remains to be seen whether they will create the conditions for sustained Bitcoin growth or further destabilize the crypto market. Experts continue to debate the long-term impact on global trade relations, inflation, and the future of cryptocurrencies.
For now, cryptocurrency traders and investors will be keeping a close eye on both the macroeconomic landscape and any signs of escalation in the trade disputes. As Trump’s tariffs go into effect, one thing is certain: the world of finance and trade may never look the same again.
