1. Introduction

After Trump returned to the White House, he quickly fulfilled his tough promises regarding tariffs made during his campaign, igniting an unprecedented tariff storm, described by outsiders as triggering "Tariff War 2.0," which caused severe turbulence in both traditional financial markets and the cryptocurrency market. Bitcoin and the entire cryptocurrency market experienced significant declines under this pressure, with many crypto projects facing tough challenges. This article will analyze the specific measures of Trump's new tariff policy, the macro transmission mechanisms, the future direction of U.S. tariff policy, and its profound impact on the cryptocurrency market, helping investors gain a comprehensive understanding of the associated risks and opportunities.

2. Tariff Policy Since Trump's Return to the White House

February: The Tariff Stick is Thrown

(1) Targeting North America: On February 1, the U.S. announced a 25% tariff on all imported goods from Canada and Mexico (with a 10% tariff on Canadian energy resources) to pressure the two countries to strengthen border security, immigration control, and combat drug smuggling. Canada immediately announced a 25% retaliatory tariff on billions of dollars worth of U.S. products, and Mexico also planned to implement retaliatory measures.

(2) Targeting China: On the same day, Trump announced a 10% tariff on all Chinese goods exported to the U.S., effective February 4. This move was claimed to pressure China to take action to curb the smuggling of drugs like fentanyl into the U.S. Trump also signed an executive order to eliminate the previously exempt tariff policy for low-value goods (under $800) from China and Hong Kong, meaning these small packages would also be subject to the new 10% tariff. These initial measures marked the beginning of the Trump administration's new tariff policy.

March: Tug of War Over Tariffs

(1) NAFTA Tariff Turmoil: On March 4, the Trump administration officially imposed a 25% tariff on all goods produced in Mexico and Canada. Canada immediately announced a corresponding tariff on U.S. products, and Mexico also indicated it would formulate retaliatory measures, raising concerns about a new round of trade war. Just a day later, on March 5, Trump temporarily exempted tariffs on Canadian and Mexican automobiles for one month to relieve pressure on the three major U.S. automakers. On March 6, Trump signed an executive order to postpone the tariffs on Mexico and Canada until April 2 to continue negotiations. As a result, Canada and Mexico postponed their planned countermeasures. Despite a brief easing, on March 7, Trump threatened to impose new tariffs on Canadian lumber and dairy products, criticizing Canada for its long-standing high tariffs on U.S. agricultural products and stating that the U.S. would respond with equivalent tariffs. Trump explicitly stated that "there will be more changes and adjustments regarding tariffs in the future," and this series of back-and-forth actions highlighted the radical and volatile nature of the Trump administration's tariff policy, shaking the stable foundation of North American free trade relations in a short period.
(2) Return of Steel and Aluminum Tariffs: The Trump administration also reinstated high tariffs on global steel and aluminum products in March. Starting March 12, the U.S. reimposed a 25% tariff on imported steel and a 10% tariff on aluminum (based on national security reasons under Section 232), which was essentially a "return" of measures implemented during Trump's first term. In response, the EU implemented retaliatory tariffs ranging from 4.4% to 50% on U.S. steel and aluminum products starting April 1.

April: Escalation of the Tariff War

"Liberation Day" Universal Tariff: On April 2, Trump announced a new round of tough tariff measures at the White House, referred to as the "Liberation Day" tariffs. He signed two executive orders regarding "reciprocal tariffs":

(1) Universal Taxation: Starting April 5, an additional 10% "universal" tariff would be imposed on all imported goods from 185 countries worldwide. This meant that, with few exceptions, the U.S. increased the ad valorem tax on the vast majority of imported products by 10%. The U.S.-Mexico-Canada Agreement (USMCA) partners Canada and Mexico were temporarily exempt from this 10% universal tariff, and small e-commerce packages (under $800) were also exempted to reduce the impact on daily consumption.

(2) Reciprocal Tax Increase: For economies with significant trade deficits with the U.S., higher reciprocal tariff rates would be imposed on top of the 10% base rate, effective April 9. Specific countries and rates included: China 34%, EU 20%, Japan 24%, South Korea 25%, Taiwan 32%, India 26%, Thailand 36%, etc. Additionally, a 25% tariff would be imposed on all imported automobiles and parts, effective April 3, aimed at promoting the "repatriation" of the automotive industry to the U.S. This round of tariffs almost ensnared all major trading nations globally, with an unprecedented scope and high rates, described as dropping a "tariff nuclear bomb."

Source: https://www.bbc.com/

Such a dramatic increase in tariffs undoubtedly triggered strong shocks globally, with countries expressing their readiness to retaliate: On April 3, the EU and Canada clearly stated they were "prepared to take retaliatory measures," while Japan sought exemptions; on April 4, China announced a 34% tariff for reciprocal retaliation. Subsequently, Trump threatened an additional 50% tariff, bringing the total to 104% when combined with the previously imposed 20%. On the same day, China announced further countermeasures, stating that starting April 10, it would impose an additional 50% tariff on all U.S. imports, raising the total tariff rate to 84%. A comprehensive trade conflict emerged between the U.S. and major economies represented by China.

Less than 24 hours after the U.S. officially imposed high reciprocal tariffs on dozens of trading partners, Trump suddenly changed his stance. On April 9, Trump announced a 90-day suspension of the new tariffs, citing that over 75 countries had contacted U.S. representatives for consultations, during which the universal tariffs would be reduced to 10%, with the suspension measures taking immediate effect. The 90-day tariff suspension did not apply to tariffs on Mexico and Canada. At the same time, tariffs on Chinese goods would be raised from 104% to 125%.

3. Transmission Mechanism of Tariff Policy's Impact on the Cryptocurrency Market

Trump's new tariff policy not only changed the international trade landscape but also affected the cryptocurrency market, including Bitcoin, through multiple macroeconomic channels. Tariffs, as an important macro policy tool, can trigger chain reactions in economic growth, inflation, capital flows, exchange rates, and market sentiment, which in turn transmit to cryptocurrency asset prices. The specific mechanisms are as follows:

• Economic Slowdown and Inflation Concerns: Large-scale tariffs are equivalent to imposing taxes on imported goods, directly raising costs for businesses and consumers. This will elevate inflationary pressures and drag down economic growth. Rising inflation expectations combined with economic slowdown are dangerous signals for the market, prompting investors to turn to traditional safe-haven assets. In fact, amid rising tariff uncertainties, investors have favored gold over Bitcoin and other emerging assets this year: In early April, international gold prices briefly surpassed the historical high of $3,150 per ounce. Although Bitcoin is viewed as "digital gold" that hedges against inflation, market performance shows that its speculative attributes temporarily overshadowed its safe-haven attributes, with inflation-driven safe-haven demand primarily flowing to traditional assets like gold.

• Tightening Dollar Liquidity and Cashing Needs: The trade war disrupts global supply chains and trade, potentially leading to tighter dollar liquidity. A decline in imports and exports reduces the dollar supply under trade, while trade uncertainties make businesses and investors more inclined to hold cash, increasing the demand for dollars. In this scenario, some institutions and investors may be forced to liquidate assets to raise dollar cash. Some investors in a declining stock market may sell their cryptocurrency holdings for cash. Such selling pressure exacerbates the downward trend in cryptocurrency prices. Safe-haven sentiment may also push up the dollar exchange rate, putting pressure on Bitcoin prices denominated in dollars. Currently, under the impact of tariffs, the market expects the Federal Reserve to cut interest rates earlier to support growth, which has driven U.S. Treasury yields to plummet (the yield on 10-year U.S. Treasury bonds fell by 20 basis points after the tariff news). Changes in interest rate expectations also affect capital allocation preferences: safe-haven funds flow into the bond market and dollar assets, relatively weakening the willingness to allocate to high-risk assets.

• Market Risk Appetite and Sentiment Shift: Large-scale tariffs are seen as significant negative news, directly shaking global investors' risk appetite. The trade tensions triggered by Trump's tariff policy have caused market uncertainty to soar, leading investors to "sell first and observe." The decline in the stock market is highly correlated with the decline in Bitcoin prices; according to TradingView data, the correlation coefficient between Bitcoin prices and the S&P 500 index is as high as 0.66, indicating that under severe risk shocks, Bitcoin is currently viewed by the market as a risk asset rather than a safe haven. The uncertainty brought by tariff policies has also weakened the previously optimistic sentiment in the market. Trump had once released friendly signals towards cryptocurrencies during his campaign and early presidency, causing Bitcoin to soar to about $109,000 by the end of 2024. However, the shadow of the tariff war quickly loomed, and as trade prospects worsened and economic downward pressure increased, the market's risk aversion sentiment prevailed, significantly diminishing the previous upward momentum of crypto assets.

Source: https://newhedge.io/bitcoin/us-equities-correlation

• Historical Trends and Changes in Cryptocurrency Asset Positioning: The cryptocurrency market's reaction to trade conflicts has changed compared to a few years ago. When Trump first launched the trade war in 2018, some investors viewed Bitcoin as a tool to hedge against uncertainty, driving its price from a low of about $3,700 to $13,000, showcasing a "counter-trend" rally. However, the current market is more mature and more strongly linked to mainstream markets. In this round of tariff shocks in 2025, Bitcoin did not replicate the strong performance of 2018 but instead fell alongside stocks. This indicates that the investor structure and market positioning of Bitcoin are changing: the proportion of institutional investors is increasing, and trading behavior resembles that of risk assets like tech stocks rather than operating independently. This change also highlights the increasing integration of the cryptocurrency market within the global financial system.

4. Analysis of Cryptocurrency Market Performance After Tariff Policy Implementation

The performance of Bitcoin and the cryptocurrency market in the first quarter of 2025 was highly correlated with the rhythm of Trump's tariff policy, with changes in trading volume and capital flows reflecting a shift in investor sentiment from optimism to caution. Under such macro pressure, the cryptocurrency market entered a period of low adjustment in the short term.

February's Optimism Cools: From the end of 2024 to early 2025, buoyed by Trump's election and his claims of support for digital assets, Bitcoin continued the bullish trend of the previous year, briefly surpassing the $100,000 mark. However, as tariff news began to emerge in early February, Bitcoin's price quickly turned downward, and the overall cryptocurrency market began to plummet. By the end of February, Bitcoin's price had fallen about 28% from its January peak, entering a technical bear market. Throughout February, the total market capitalization of global cryptocurrencies shrank by over $1 trillion. It can be said that the cryptocurrency market experienced a "cooling" during the first round of tariff turmoil.

March's Volatile Consolidation: Entering March, the Trump administration's tariff policies on Mexico, Canada, and steel and aluminum products were full of twists and turns, causing market sentiment to fluctuate. After news of the North American tariffs being temporarily postponed emerged in early March, Bitcoin fluctuated around the $80,000 mark. On one hand, the postponement of tariffs on allies provided some comfort to the market, leading to a brief rebound in risk assets; on the other hand, Trump's frequent hardline statements made investors hesitant to enter the market aggressively. Throughout March, Bitcoin's price fluctuated widely within the $75,000-$90,000 range.

"Liberation Day" Tariffs Trigger April Shock: In early April, the news of Trump officially signing the comprehensive tariff executive order became the catalyst for a new round of severe market volatility. On April 2, the day the comprehensive tariff plan was announced, Bitcoin's price initially surged to about $87,400, seemingly misinterpreted by some funds as a buying opportunity driven by inflation benefits, but then plummeted, hitting a low of around $82,000, with an intraday volatility exceeding 6%. By April 9, Bitcoin continued its downward trend, with its price significantly dropping to $74,508, marking the lowest point of the year.

Source: https://www.hotcoin.com/en_US/trade/exchange

According to CoinMarketCap data, on April 2, the day of the tariff announcement, global cryptocurrency-related investment products (such as ETFs) experienced a net outflow of about $8.6 billion, with Bitcoin ETFs alone seeing a net outflow of $8.7 billion in a single day. This indicates that institutional funds quickly withdrew from the market upon the announcement. Additionally, the entire cryptocurrency market lost about $500 billion in market capitalization during the week affected by the tariff news. Meanwhile, CME Bitcoin futures open interest declined, suggesting that some institutional investors reduced their risk exposure. All these signs indicate that in the risk-averse environment triggered by tariff policies, funds are temporarily flowing out of the cryptocurrency market, leading to tightening liquidity.

5. Future Direction of Tariff Policy and Outlook for the Cryptocurrency Market

At the beginning of 2025, the world economy was already in a situation of slowing growth and declining inflation. After experiencing an interest rate hike cycle in 2024, inflation in the U.S. had cooled, but growth momentum weakened, with the European economy hovering on the edge of stagflation, and emerging markets like China struggling to recover. The outbreak of a comprehensive trade war at this time added further gloom to the fragile recovery outlook.

5.1 Future Direction of U.S. Tariff Policy

Trump may use extreme pressure as a negotiating chip, moderately reducing some tariffs after forcing trade partners to make concessions in exchange for political gains. For example, tariffs on Canada and Mexico may be canceled or reduced after both sides reach an agreement on immigration and drug issues; tariffs on EU automobiles may be shelved through new trade negotiations; tariffs on China may see some "phased cancellations" in exchange for China expanding purchases or opening its market.

The Trump administration emphasizes that tariff revenues can be used to support domestic industries and infrastructure, and ultimately, some tariffs may be slightly adjusted through negotiations. However, high tariffs in key areas such as new energy and semiconductors are expected to remain entrenched for the long term. If the economy significantly deteriorates in the second half of 2025, it is possible that the Trump administration will be forced to adjust its tariff strategy.

5.2 Impact of U.S. Tariff Policy on Monetary Policy

Under the impact of tariffs, the deteriorating growth outlook is believed to force the Federal Reserve to loosen its policy earlier than originally planned. Investors expect the Fed to potentially start cutting interest rates in the second half of 2025. Analysis from JPMorgan Private Bank indicates that the market expects the Fed to lower rates to around 3.5% by the end of the year, believing that growth risks will outweigh inflation risks as the main driver of lower yields. However, on one hand, the trade war raises recession concerns, while on the other hand, inflation driven by tariffs limits the central bank's room for easing. This policy dilemma increases uncertainty in the market outlook.

If tariffs remain in place for the long term, high import taxes effectively impose a stagflation shock on the U.S. economy. If all tariffs are implemented, the resulting price increases may put the Fed in a dilemma: cutting rates could stimulate inflation and asset bubbles, while not cutting rates would exert significant downward pressure on the economy. If trade negotiations make progress and tariffs are partially lifted, it could improve growth expectations and alleviate inflation pressures, opening up room for the Fed to cut rates, which would benefit various assets, including Bitcoin.

5.3 Future Direction of U.S. Tariff Policy and Potential Impact on the Cryptocurrency Market

If trade tensions can be alleviated in the short term, global risk appetite may rebound, and cryptocurrencies could usher in a new round of upward momentum. Especially if the Fed can smoothly cut rates or even resume quantitative easing to release liquidity, Bitcoin and Ethereum, which have undergone deep adjustments, are likely to strengthen again. Given Trump's relatively friendly stance towards cryptocurrencies, if the economy improves, he may be more willing to embrace crypto technology to attract investment, such as promoting regulatory reforms for digital assets and approving more compliant products for listing.

Conversely, if the trade war persists or worsens, the global economy may fall into recession, leading to a downturn in traditional financial markets. In such an environment, cryptocurrencies are likely to decline alongside risk assets in the short term. However, after undergoing a trial, Bitcoin has the opportunity to reprove its value storage function amid turmoil. When countries initiate competitive easing and fiat currency credibility is undermined, Bitcoin, as a scarce asset unaffected by central bank overissuance, may gain renewed favor from investors.

6. Conclusion

In the short term, the impact of tariff policies on the cryptocurrency market is predominantly negative, with the market struggling to find a bottom amid risk-averse sentiment; in the medium term, the impact will depend on the evolution of the trade war and the effectiveness of macro hedging policies, with the cryptocurrency market likely maintaining a high volatility and oscillating bottoming pattern; in the long term, it will drive the global economic and financial system to develop in new directions, during which Bitcoin and the overall cryptocurrency assets may gain unexpected strategic opportunities.

Regardless of the outcome, this round of tariff shocks provides an opportunity for the cryptocurrency industry to test its resilience: whether Bitcoin can truly become "digital gold" will be tested over a longer period. If the global economy trends towards fragmentation due to protectionism, Bitcoin has the potential to become a value anchor and hedging tool connecting various economic systems.

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