In 2025, aggressive US tariffs are impacting global trade, shaking up crypto markets significantly. The rise in tariffs, especially on imports from China and the EU, could lead to heightened macroeconomic volatility. Cryptocurrencies have seen substantial dips, with Bitcoin down nearly 19.1%, reflecting a traditional pattern of risk aversion among investors. Overall, as the situation evolves, investors are closely monitoring potential recessions and market shifts.
The crypto markets are experiencing significant upheaval in response to aggressive tariff escalations announced by the United States in 2025. These tariffs, targeting imports from various nations including China and the European Union, have generated widespread reactions among investors and analysts. The current situation echoes past events, such as the Smoot-Hawley Tariff Act of the 1930s, marked by a shift towards protectionism and heightened market volatility.
Richard Teng, the CEO of Binance, remarked on the tumult in the macroeconomic landscape, stating, “The resurgence of trade protectionism is increasing volatility across global markets, including crypto. Investors are now pulling back, grappling with uncertainty in growth, policy, and trade dynamics. Even so, some investors view cryptocurrencies like Bitcoin as a resilient asset during these turbulent periods.”
In terms of specific tariffs, the United States under President Trump has implemented aggressive measures, including a baseline tariff of 10% on all imports and some tariffs as steep as 54% on goods from China. These tariffs took effect on April 5 and indicate a significant shift from prior decades of trade liberalisation.
The impact extends beyond China, with the European Union facing a 20% tariff, Japan receiving a 24% duty, and Vietnam’s tariffs hitting 46%. Moreover, the auto sector has faced a 25% duty increase. The announcement on April 2 termed “Liberation Day” further expanded the trade conflict to encompass over 60 nations, signalling a broadening economic rift.
China’s retaliation came quickly, raising its tariffs on US goods to 84% and imposing export controls on critical minerals, along with suspending agricultural imports from the US. China’s Ministry has firmly expressed their resolve to “fight to the end,” indicating no immediate resolution is in sight.
The EU has also retaliated, approving tariffs of 25% on numerous American products, expected to be enforced between April 15 and December 1, depending on negotiation progress. This is part of a broader pushback from the EU against what they perceive as US aggression in trade affairs, particularly with regards to essential goods like steel and agricultural products.
As a direct result of these measures, the average US tariff rate has ascended to approximately 18.8%, spurring fears of recession and creating market uncertainty. This substantial increase is a jarring change from only 2.5% tariffs previously recorded in 2024.
Turning our gaze to the impact on the crypto markets, values have plummeted—total market capitalisation has decreased by 25.9%, amounting to a loss of around $1 trillion. Bitcoin alone has dipped 19.1%, while Ethereum and certain high-risk altcoins have lost up to 50%. Investors have shifted preferential allocations from cryptocurrencies to traditional assets perceived as safer, such as gold, which has surged as a result.
Investor sentiment has notably changed, with many now pointing toward gold as a more favourable asset; only 3% of fund managers are considering Bitcoin for investment, with a whopping 58% leaning towards gold instead. Simultaneously, Bitcoin’s volatility has skyrocketed, reaching levels reminiscent of previous market crises, resulting in sharp price fluctuations following every tariff announcement.
The macroeconomic backdrop complicates the scenario further. Tariff-induced inflation risks are rising just as the Federal Reserve aims to maintain price stability. Inflation expectations by consumers and in swaps have crept between 3% and 5%, while growth fears contribute to concerns about stagflation. Futures contracts now anticipate four potential rate cuts in 2025, doubling previous forecasts.
Looking forward, the evolving dynamics of the crypto market under ongoing tariff pressures present several scenarios. Bitcoin’s correlation with risk assets like the S&P 500 is on the rise, while its relationship with gold seems to fade. Nevertheless, historically, Bitcoin’s intensity of correlation with equities becomes weaker as market pressures decrease.
In terms of future potential, Bitcoin’s status as a hedge against economic instability will largely rely on how the Fed addresses upcoming challenges. Should interest rates fall due to economic conditions, it may bolster crypto as alternative money.
However, ongoing trade contention might dampen retail participation in crypto, alongside negatively affecting institutional investment and Web3 expansion. Binance warns that in a market facing stagflation and protectionism, volatility could persist. Positive developments in trade negotiations or definitive action from the Fed could provide the market with vital cues, yet presently, investor sentiment remains evidently cautious amid all this uncertainty.
