How Trump’s Tariffs Impact Cryptocurrency and the Global Market

Trump’s trade policies have dominated headlines in recent weeks, with his most recent move being the levying of tariffs on virtually every country in the world. Trump himself has said it will bring manufacturing and economic prosperity back to the US. Proponents claim it will raise additional revenue for the government, but opponents say it will push prices up and that it is consumers who will ultimately pay the price, in the form of higher prices.

Cryptocurrency’s Role

Cryptocurrency is billed as being a hedge against market turbulence. The crypto markets also tend to prosper during times of high inflation. To benefit, users need to buy or exchange crypto using exchanges or directly from third parties, before storing their holdings. The best ERC20 wallet can be used to store Ether as well as coins and tokens developed on the Ethereum network. Users can also track their coin and token performance while being able to make payments quickly and seamlessly using the wallet.

What Trump Did

Trump has long declared himself a fan of tariffs. In January he said: “Tariffs are the most beautiful word to me” during his inauguration day speech. And, he has been true to his word, initially threatening and withdrawing tariffs against countries including Canada and Mexico, before eventually implementing levies. This week, Trump initiated baseline tariffs for virtually every country in the world, starting at 10%. Some countries have now been hit by cumulative tariffs as high as 50% or more.

The Effects So Far

So far, global stock markets have suffered substantial drops, while the US Dollar tanked on the announcement. Bitcoin, despite being considered a good investment in times of turbulence, also underwent price declines immediately following Trump’s announcement with prices falling around 4% in the 24 hours following the tariff launches.

The so-called reciprocal tariffs were announced on April 2, when Bitcoin was trading at around $87,000. Prices initially slumped to $82,500 and have ranged between $81,500 and $84,500 since. BTC’s price is currently around $83,000. While Bitcoin’s prices have dropped, they haven’t fared as badly as stock markets or even the US Dollar, in trading.

Looking beyond pure prices, the total market value has suffered. 24 hours after the tariffs were announced, total cryptocurrency market capitalization stood at $2.75 trillion, which was down 6% in the 24 hours.

Crypto Stock Prices

Crypto stocks also fell after the announcement. Coinbase dropped nearly 8% while mining companies MARA Holdings (8.3%), Riot Platforms (8.7%), and Bitfarms (5%) shed value, too. Miners may be some of the hardest hit, following these latest levies.

Most mining equipment is manufactured in and imported into the US from China, and China has been hit hardest by the new fees with a combined 54% now levied against products from the country. Taiwan and South Korea also produce some of the most highly sought-after mining chips, and these countries were hit with 32% and 25% tariffs respectively.

Trump On Crypto

Trump has previously promised to make the US the Bitcoin mining capital of the world, despite having previously described Bitcoin as a scam. His tariffs, however, seem to run counter to his latest crypto promises.

According to experts, the new charges will cause institutional investors, who are the ones with the deepest pockets, to move away from US-led companies. This means they will be more inclined to invest in crypto companies from other regions. And, despite promises made to his multi-billion dollar election campaign backers from the crypto market, Trump has not exactly been forthcoming with fine details.

There have been promises of Bitcoin strategic reserves, but other than stating that the US will no longer sell off seized cryptocurrency assets, no more information has been forthcoming, as yet.

The Start Of A Trade War

Trump’s reciprocal tariffs are not viewed as being reciprocal by the rest of the world. As such, many countries are already highlighting their own retaliatory tariffs and this looks like the beginning of a global trade war. A trade war will cause uncertainty in all markets, and, in the short term, most investors will likely move their investments to more secure, stable alternatives.

Bonds, and even cash, will become more popular in the coming months. In the long term, however, increased volatility in traditional stock markets may play in cryptocurrency’s favor. What’s more, if price rises are passed on to consumers, which seems highly likely, this will likely result in higher inflation. Bitcoin can enjoy price increases during inflation shock. However, as investors likely expect increases in inflation, there not be a shock.

Uncertainty Looms

In truth, few people are certain what will happen following the introduction of Trump’s tariffs. The move is unprecedented, and markets have never experienced anything quite like it. Trump himself believes that in the US at least, stocks will eventually boom. He believes that a reduction in trade deficits means more people will buy US goods, and this will lead to higher profits for US companies. In turn, workers will be paid more.

So far, the cryptocurrency market has responded similarly to stock markets and even financial markets, suggesting a degree of market maturity we haven’t really seen in web 3.0.

It seems highly likely that companies that rely heavily on Chinese imports, and import from other countries with high levies, will suffer, but this won’t necessarily carry over from stocks to crypto coins. Crypto could benefit in the long term, as investors look for ways to hedge against inflation through alternative investments.

Next Moves

Markets are likely to continue fluctuating in the coming weeks. The EU has suggested it will respond with tariffs on the US, set to launch in mid-April. Even the UK, which saw the lowest tariffs of all countries and has so far avoided threatening retaliatory measures, has drawn up a list of hundreds of US products that could be taxed if the two countries fail to come to a beneficial trade agreement.

Main Image Source: Unsplash