On April 2, 2025, President Trump declared a national emergency and introduced a slew of tariffs targeting almost every country in the world. Dubbed “Liberation Day,” Trump’s administration established a 10% baseline tariff on all imports, with a massive tariff of up to 245% on some imports from China.
In retaliation, China introduced its own measures that include curbs on the export of rare earth minerals and tariffs of up to 125% on US goods. Since the tariffs kicked off, trade between the biggest and second biggest economy in the world has slowed to a near stop, with both sides playing hardball.
Impact On The Financial Markets
There was an immediate reaction from the markets, with the S&P 500 down by double digits in the first few days. Since then, most of the financial markets have been trending downward as uncertainty regarding the tariff wars continues.
On April 16, 2025, tensions escalated when the US introduced new restrictions on chip exports to China. Previously, NVIDIA had been allowed to export a powered-down version of its AI chips, called H20. However, under the new restrictions, exporting H20 chips will require a federal license, which is expected to cost NVIDIA over $5 billion in the current fiscal year.
The Impact On The Crypto Markets
President Trump’s latest tariff war picks up from where it was in 2018 to 2019. When the recent tariffs were announced, Bitcoin immediately dipped to around $76K per coin. The reason for this is that during times of high uncertainty, investors tend to reduce their appetite for high-risk assets. Within a few days, over $200 billion was wiped off the global crypto market.
However, crypto markets have proven to be much more resilient over the years and have not stayed down for long. By April 17, 2025, the price of Bitcoin had bounced back to just under $85K. Other major altcoins like Ethereum have also experienced a recovery, which lines up with the changing views on crypto, with some investors increasingly viewing it as a hedge against sudden changes in government policy.
The Stagflation Risk
Apart from volatility, investors in the crypto market are also worried about stagflation, which is a combination of slow growth and increased inflation. The new tariffs could drive up prices, reversing gains by the Fed to cool down inflation. If the current tariff regime persists, US real GDP per capita could dip by almost 1%, according to Fitch Ratings.
On April 4, 2025, Fed Chair Jerome Powell revealed that the tariffs announced by Trump were bigger than the Fed had expected. As such, the impact on growth and inflation would need to be monitored closely. Investors have begun pricing in interest rate cuts in 2025, a reversal of previous tightening expectations. However, the Fed faces a tough balancing act. If it cuts rates too fast, it could fan inflation, and waiting too long could deepen a downturn.
The Future Of Crypto
One notable aspect of the current trade wars is that Bitcoin’s correlation with traditional markets fades after periods of stress. However, the short-term impact is high uncertainty. With the price of Bitcoin and the overall crypto market being determined by trade policy, analysts believe this could help purge the market of speculative pricing accumulated during the 2024 bull run.
Analysts also believe that the ongoing turmoil could rekindle interest in DeFi, as traders look for alternatives to fiat systems at risk of disruption by geopolitical tensions.
The Fear And Greed Index
The crypto market is highly influenced by fear and greed, and currently, the Crypto Fear & Greed Index is sitting at 30, which signals there is heightened fear amongst investors. This index, which is rated from 0 to 100, with 100 being extremely hopeful, and 0 being extreme fear.
However, it is worth noting that towards the end of March, it briefly fell below 20, signalling extreme concern on tariffs. Its current level of 30 indicates that investors are claiming down. Despite the relative calm, interest in meme coins and altcoins has gone down significantly. As such, it means that in 2025, there might not be an altcoin season. Historically, Ethereum triggers the altcoin season. However, it is down 53% so far this year, and down 16% in the past month.
Instead, the best opportunity this year is likely in Bitcoin, whose reputation as digital gold continues to gain traction. While there is still debate about Bitcoin’s long-term store of value, it appears to be holding up quite well amid the tariff wars compared to other top cryptos.
Bitcoin As a Strategic Asset
If the trade wars do not cool down, it is possible that governments around the world could begin to eye Bitcoin as a strategic asset. While bigger countries like China can hold off the impact for months or possibly years, tiny countries may not have that luxury, forcing them to take unusual steps to achieve their economic goals.
A good example is the proposed Bitcoin Reserve by Trump. The current proposal is that Bitcoin should be considered a strategic asset like oil or gold, and the government should have a stockpile of it. There have been proposals to pay down the US national debt of over $37 trillion using Bitcoin.
Additionally, current Treasury Secretary Scott Bessent has said that stablecoins, which are pegged to the USD, could be used to attain certain monetary goals. Most stablecoins are backed by cash and short-term Treasury bills.
Future Threats and Opportunities Amid Tariffs
Amid tariff wars, there are numerous threats and opportunities that exist for the crypto world. One of these is the potential strengthening of the US dollar. However, a subsequent end to such wars could reverse this gain. As such, investors might seek refuge in Bitcoin, which could act as a hedge against dollar value instability.
Ongoing global de-dollarization is another important factor. Many countries, such as China, are not actively looking for alternatives to the USD. Additionally, the BRICS nations are working on an alternative currency to the dollar. In such a fragmented world, where the dollar is not the standard for international trade, Bitcoin could thrive. The use of BTC is often most prevalent where it is the only neutral option available. The current trade wars could trigger its fast adoption in this role.
Another noteworthy consideration is potential panic. While the markets have remained calm, with hopes that deals could be reached soon, there is still the potential for panic if tariff wars persist. The tariff wars could erase $5 trillion in market valuation, flatten yields, and make traditional safe havens like gold less attractive. Such conditions could potentially lead investors to consider high-risk, high-reward alternatives like Bitcoin.
The tariff wars could also expose some inherent weaknesses and vulnerabilities in global institutions. They could trigger debt defaults and erode trust in the global fiat system. In such a scenario, Bitcoin would fit in perfectly since it is the exact purpose for which it was designed.
Conclusion
The ongoing tariff wars and border geopolitical tensions present both threats and opportunities for the crypto market. These tariff wars have brought the role of Bitcoin in the global financial sector into sharp focus, including forecasts on how leading crypto projects could perform in the long term.
Currently, the crypto market is bearish, driven by fear, with the price of Bitcoin still below its all-time high of over $100K. However, despite the ongoing uncertainty, one point that is clear is that while Bitcoin is not a guaranteed investment, it is one of the best assets to have if the ongoing tariff wars turn into an all-out global trade war.
