“Reside by the Sword, Die by the Sword”?
Hedy Bi, OKG Analysis
U.S. President Donald Trump confirmed the imposition of tariffs on Canada and Mexico yesterday, set to take impact on April 2. Hopes of a last-minute deal to keep away from sweeping tariffs had been dashed, sending shockwaves throughout world markets.
Bitcoin, which had barely had time to digest the day past’s “crypto strategic reserve” optimism, tumbled 8% inside 48 hours. U.S. shares additionally felt the influence, with the Nasdaq dropping 2.6%. In simply over a month since Trump’s return to workplace, the crypto market has shed 22% of its whole market capitalization, whereas Trump Media & Know-how Group (DJT) has plunged 34.75%. Even Elon Musk, a staunch Trump supporter, was not spared. Tesla’s inventory fell 32.87%, weighed down by the corporate’s controversial Dogecoin-related strikes and Musk’s rising involvement in world political affairs.
Trump’s each phrase and motion are sending tremors by way of the crypto market, reinforcing the notion that its fortunes are intently tied to his insurance policies — for higher or worse. In 2025, OKG Analysis is launching a particular collection, Trumpnomics, to trace the influence of Trump 2.0 on the crypto market. In our earlier article, A New Spherical of Liquidity Approaches: Can the Crypto Market Leverage It to Break New Highs?, we argued that market individuals ought to deal with actual liquidity (similar to Treasury Common Account actions) reasonably than media noise. We highlighted that with out real liquidity assist, market euphoria fueled by mere rhetoric is unlikely to be sustainable. Notably, in response to official U.S. Treasury knowledge, the TGA ceased injecting liquidity into markets on February 28 after having pumped in a complete of $304.89 billion.
Now, with tariffs rising as the primary main coverage lever, world threat markets — particularly these with robust U.S. publicity — are feeling the warmth. However why does Trump proceed to depend on commerce wars, regardless of their disruptive results? This text, the fifth in OKG Analysis’s Trumpnomics collection, examines the deeper logic behind Trump’s “tariffs in a single hand, crypto within the different” strategy.
Trump made loads of guarantees each earlier than and after taking workplace, however his first main motion was imposing tariffs.
Superficially, his tariff hikes goal to scale back commerce deficits, increase employment, and strengthen the financial system. Nonetheless, previous expertise — whether or not from Trump’s first time period or the Thirties world commerce struggle triggered by the Smoot-Hawley Tariff Act — means that tariffs are not often a worthwhile enterprise. The U.S. Congressional Finances Workplace (CBO) estimated that Trump’s 2018–2019 commerce struggle shaved 0.3% off U.S. GDP, amounting to a $40 billion loss. The Peterson Institute for Worldwide Economics discovered that Trump’s metal and aluminum tariffs alone resulted within the lack of roughly 75,000 U.S. manufacturing jobs. Slightly than bringing manufacturing again to the U.S., many companies merely relocated to low-cost international locations like Vietnam and Mexico (Kearney). Traditionally, tariff wars have had extreme penalties: after the U.S. handed the Smoot-Hawley Tariff Act in 1930, world commerce shrank by 66%, U.S. exports plummeted by 67%, and worth distortions led to widespread farm bankruptcies.
Tariffs, nonetheless, are merely the opening transfer. Trump’s administration is leveraging financial uncertainty as a negotiation software. The center of this commerce struggle isn’t just about items, but additionally about know-how restrictions, capital flows, and foreign money competitors. Commerce disputes have developed past tariff limitations into deeper interventions within the world monetary system — spanning foreign exchange markets, inventory valuations, bond yields, and threat property.
Even Warren Buffett has damaged his regular silence, warning that punitive tariffs might stoke inflation and harm customers. A shift in financial expectations might, in flip, complicate the Federal Reserve’s already precarious balancing act: tips on how to management inflation with out triggering a extreme recession. Client confidence shocks could dampen progress, whereas inflationary pressures might constrain the Fed’s potential to chop rates of interest, tightening liquidity additional and leaving policymakers trapped.
For the crypto market, a sector that amplifies world threat sentiment, the influence of those insurance policies is substantial. Bitcoin mining, for instance, stays closely reliant on Nvidia-powered GPUs, and crypto-related companies similar to Coinbase and MicroStrategy are a part of the Nasdaq 100 index. U.S. monetary insurance policies and regulatory choices have lengthy formed the crypto panorama.
In different phrases, crypto behaves extra like a by-product of U.S. monetary coverage than an unbiased hedge. As mentioned in OKG Analysis’s Crypto Market Repositioning: The Rising Pains of International Liquidity Constraints (July 2024), if macro situations stay unchanged, the market response to tariffs will depend upon the response of different nations. If international locations select to compromise, present crypto volatility could show short-lived, and in the long term, U.S.-linked threat property — together with crypto — may benefit. Nonetheless, if nations retaliate with their very own tariffs, escalating the commerce struggle, threat property might face sustained downward strain.
With tariffs proving economically damaging and failing to ship significant positive factors for Trump’s key assist base — the “MEGA” (Mega Curiosity Teams) — how does Trump’s second administration hope to leverage each tariffs and crypto to “make America nice once more”?
Over the previous month, U.S. monetary market turmoil has mirrored a broader erosion of confidence within the American system. As Nobel laureate Paul Krugman not too long ago famous in his weblog, Elon Musk and Donald Trump, within the 5 weeks since taking energy, have recklessly undermined U.S. affect on a number of fronts — breaking guarantees, threatening allies, partaking in mafia-style coercion, and interfering in democratic elections.
Historical past means that when nationwide creditworthiness deteriorates, capital doesn’t stay idle — it finds different channels.
Contemplate the case of Japan. Within the Eighties, rising U.S.-Japan commerce imbalances led to mounting tensions. The U.S., looking for to appropriate these imbalances, pressured Japan to signal the Plaza Accord, which resulted in a pointy yen appreciation. This crushed Japan’s export-driven financial system, triggering monetary instability. Because the Japanese authorities tightened rules, markets sought different liquidity pathways, fueling a surge in black-market finance — together with gold smuggling, offshore greenback buying and selling, and casual foreign exchange markets. At its peak, Japan had over 17,000 underground monetary hubs (Nikkei). These unofficial monetary methods emerged as pure hedges towards the collapse of conventional constructions. After crippling Japan’s financial rise, the U.S. later used army procurement orders and financial liberalization to reintegrate Japan into the worldwide system — resulting in a short lived increase earlier than the eventual collapse of Japan’s asset bubble.
This historic precedent underscores the important thing function of parallel monetary methods in commerce wars. Right this moment, Trump’s proposal to ascertain a crypto strategic reserve could seem as monetary innovation, however it’s doubtless an unconventional software for extraordinary occasions.
There are two core causes for this:
- With the greenback’s credibility beneath strain and the Fed’s coverage toolkit exhausted, the U.S. urgently wants new devices to maintain world capital confidence. Crypto might function a “quasi-financial weapon” — a strategic reserve asset that enhances authorities management over capital flows whereas showing unbiased from direct intervention.
- De-dollarization traits are gaining momentum. As commerce conflicts escalate, international locations will inevitably speed up diversification away from dollar-denominated property. The regular rise in gold costs since early 2025 is a testomony to this shift. In a world more and more skeptical of the greenback, a really decentralized crypto ecosystem — if not managed by any single nation — might command important geopolitical worth.
Trump 2.0 takes a extra assertive stance on U.S. dominance within the world financial order, as his administration seeks to dismantle the post-World Struggle II worldwide political and monetary system. Slightly than strengthening the greenback’s credit score system instantly, constructing crypto asset reserves might present the federal government with different, much less overt technique of market intervention. As crypto property and associated applied sciences achieve traction, they might pave the way in which for a brand new cross-border fee system — and, in time, a state-backed crypto monetary community.
Trump’s biography traces his household origins to Germany and describes him as a “fighter” who values ardour over intelligence or expertise. For him, the fun of closing offers at breakneck pace and defeating rivals is the last word motivator. But, within the context of commerce wars, the frenzy to renegotiate agreements and outmaneuver rivals could not essentially result in essentially the most favorable consequence for his administration.
Introduction to Trumponomics:
At OKG Analysis, we acknowledge the rising significance of Donald Trump’s financial insurance policies in 2025, significantly their influence on the crypto market. On this Trumpomics collection, we study how Trump’s second time period — by way of tax reform, regulation, and commerce insurance policies — will form Bitcoin and different crypto property. As institutional adoption and regulatory frameworks evolve, Trump’s financial agenda can be a key driver for the way forward for cryptocurrencies. By means of this collection, OKG Analysis supplies essential insights into how these elements will affect market traits and funding methods within the new financial period.
Different articles within the collection embody: