Trump’s Tariffs: What Are They?
President of the United States, Donald Trump, placed new tariffs on China, Canada, and Mexico, among other important trading partners, on February 4, 2025. Concerns about drug trafficking, illegal immigration, national security, and economic reliance on foreign supply chains were the reasons behind the introduction of the taxes.
- Canada and Mexico: A 25% import tariff was imposed.
- China: A 10% tariff was introduced.
- European Union: Trump threatened future tariffs.
- Other Sectors: Tariffs were planned for superconductors, oil, gas, steel, and copper starting February 18.
Canada and Mexico threatened to retaliate, escalating the dispute into a full-scale trade war, whereas later both the countries reached temporary deals with the U.S., including delaying counter-measures against the U.S. for 30 days.
Crypto and Stock Markets React
Following the tariff announcement, global financial markets experienced a sell-off. Crypto markets were not spared, with Bitcoin and altcoins facing massive liquidations.
Major Market Moves:
- Bitcoin (BTC) dropped below $100,000 on February 2.
- XRP and Cardano (ADA) fell by 17% and 22%, respectively.
- Trump’s World Liberty Financial portfolio suffered a 20% decline.
- Total market liquidation was estimated between $8 billion and $10 billion.
- Bybit alone saw $2.1 billion in liquidations within 24 hours.
Stock markets also took a hit, with major indexes declining across the board.
Bitcoin’s Status: Risk-On or Risk-Off Asset?
The tariff-induced crash reignited debates about Bitcoin’s classification as a risk-on or risk-off asset.
|
Asset Type |
Characteristics |
Bitcoin’s Behavior |
|
Risk-On |
Driven by earnings, sentiment, speculation |
Reacted negatively to tariffs, indicating risk-on behavior |
|
Risk-Off |
Safe haven in economic uncertainty |
Failed to hold value, unlike gold or bonds |
Market analysts largely agree that Bitcoin currently behaves as a risk-on asset. Tariffs, which reduce global liquidity, negatively impact Bitcoin’s price.
Future Market Impact
Analysts are divided on Bitcoin’s future price movements amid ongoing trade tensions.
Bearish Outlook:
- If the U.S. and its trade partners fail to reach agreements, Bitcoin may face further downward pressure.
- Retaliatory tariffs from Canada, Mexico, and China could deepen financial uncertainty.
- Increased market volatility could shake investor confidence in Bitcoin.
Bullish Outlook:
- Some investors see this dip as a buying opportunity.
- Bitwise’s André Dragosch noted “big declines in sentiment” and suggested “adding exposure to Bitcoin.”
- Jeff Park of Bitwise Invest predicted a “violent” Bitcoin price surge as financial uncertainty grows.
Trump’s Own Investments Take a Hit
Trump’s economic strategies have affected not only global markets but also his personal investments. His World Liberty Financial protocol, which heavily invested in altcoins, suffered a 21% drop in value, losing $51.7 million on February 2.
Despite these losses, Trump remains steadfast, stating that the U.S. has been economically exploited by other nations for years. He acknowledged that Americans might face short-term pain but justified the tariffs as necessary for long-term economic strength.
Trump’s tariffs have created a ripple effect in the financial markets with Bitcoin and altcoins seeing massive sell-offs. Although some investors feel that this is an opportunity to buy, others claim that such market uncertainty may push Bitcoin even lower.
As trade tensions continue, Bitcoin’s classification as a risk-on asset becomes more apparent, raising concerns about its stability during economic downturns. Whether this turmoil will lead to long-term gains or further declines remains uncertain, making the coming weeks critical for both crypto and traditional markets.
