On February 2, 2025, in a move that sent shockwaves across all global markets, the United States President, Donald Trump, announced new tariffs imposed. The list includes a 25% levy on imports from Canada and Mexico and a 10% tariff on goods from China. Heavy sell-off ensued in the stock markets and then spilled over into the crypto market; Bitcoin fell by 11%, while Ethereum plunged by 30% in value.
Crypto Market Reaction
Immediately after the news, Bitcoin tumbled by over 11% to about $91,200. Ethereum cratered even further, down almost 30% to about $2,150.
Other major cryptocurrencies, such as XRP and Cardano, also sharply sold off, while over $2.42 billion worth of crypto positions were wiped out within 24 hours, a prime case of just how volatile the space can get.
According to reports, the panic was further triggered by the idea that the tariffs will ignite inflation, causing the Federal Reserve to keep interest rates high for a longer time. Many investors adopted a risk-off sentiment by choosing liquidation in anticipation of declines ahead.
Economic Implications
One of the biggest concerns from analysts is the immediate economic impact of the Trump tariffs. The announcement has already set off retaliatory measures from Canada and Mexico, which have both placed their own tariffs on goods from the U.S. Canada announced tariffs on $155 billion worth of U.S. imports. China is reportedly preparing a complaint to the World Trade Organization. Those only add to a growing sense of uncertainty in global markets.
However, market analysts are divided over the longer-term implications of Trump’s tariffs. This panic is just momentary in the opinion of some people, and it means that the market makers could use this fear to liquidate long positions and hence create a price floor for the cryptocurrencies, opined Ryan McMillin from Merkle Tree Capital. Rising volatility is, however, most likely to persist, warned Nick Forster from Derive in view of growing concerns relating to inflation.
Future Outlook
Therefore, investors are waiting anxiously for the upcoming U.S. economic data such as non-farm payrolls and unemployment figures since such pointers would help set the course of interest rates by the Federal Reserve. Anything showing a stronger economy would make it less likely the Fed will reduce rates, therefore weighing further on crypto assets.
Some analysts have argued that the market reaction may be exaggerated, given the existing chaos. Peter Chung of Presto said that in his mind, Trump’s tariffs could be lifted should Mexico, Canada, and China step up controls on drugs, pointing out the link between the tariffs and the fentanyl trade. If the trade war eases, then the markets will likely settle down. With these tariffs, investors are now bracing themselves for more economic uncertainty and fallout across financial markets.
