Trump’s Tariff Increases: How Can Crypto Companies and Investors React?
Introduction
One of the core economic strategies of the Trump administration has been its tough trade policy. During his first term, the U.S.-China trade war, centered around tariffs, drew global attention. Now, as Trump returns to the White House, his protectionist stance has become even more pronounced, with tariff hikes once again taking center stage. This is bound to reignite global trade tensions, triggering a series of economic chain reactions that could lead to economic fluctuations and even regional hot conflicts. This uncertainty will undoubtedly have a profound impact on the cryptocurrency market. This article will review Trump’s tariff measures during his previous term and explore their potential effects on the crypto market, as well as possible response strategies.
1.Overview of Trump’s Tariff Hike Policy
1.1 Trump’s Tariff Hike 2.0 in 20 18
On March 23, 2018, Trump signed a memorandum on trade with China, announcing tariffs on $60 billion worth of goods imported from China and restrictions on Chinese investments and mergers in the U.S., marking the official start of the U.S.-China trade war. Following this, the U.S. continuously expanded the scope of tariffs, which included both high-end manufacturing goods and everyday consumer products. These tariffs targeted sectors such as aerospace, industrial machinery and equipment and their parts, motor vehicles, automobile parts, electronics, and also covered consumer goods like clothing, home goods, luggage, furniture, and lighting. Among these, the tariffs on electronic products posed a threat to mining equipment manufacturers. For example, Bitmain, which once held a 90% share of the Bitcoin mining hardware market, was significantly impacted by Trump’s tariffs in 2018, leading the company to relocate some of its production lines to Southeast Asia. In addition to China, the U.S. also imposed tariffs on multiple countries and regions around the world, with the core objective of reducing trade deficits and protecting domestic industries. This, in turn, triggered retaliatory tariff measures by other countries.
1.2 Trump’s Tariff Hike 2.0 in 2025
On January 20, 2025, Trump signed the U.S. First Trade Policy Memorandum, emphasizing the importance of protecting the U.S. economy and national security. The memorandum outlined several key areas of focus, including improving the trade deficit, investigating unfair trade practices, strengthening economic and trade relations with China, evaluating export control measures, and ensuring the interests of American workers and manufacturers.
Subsequently, the U.S. implemented new tariff measures against multiple countries. Initially, a 10% tariff was imposed on all imports from China, followed by an additional 10% increase, which took effect on March 4. The total tariff rate on Chinese goods climbed to 20%, in addition to the 25% tariff under Section 301, which meant that some critical technology equipment (such as servers, storage devices, and semiconductors) could face a combined tariff rate of 45%-70%, significantly impacting the cryptocurrency industry. Moreover, the U.S. also imposed a 25% tariff on goods from Canada and Mexico. U.S. Treasury Secretary Janet Yellen indicated that specific reciprocal tariffs would be allocated for each trade partner. In addition to country-specific tariffs, Trump planned to impose tariffs on specific products, including agricultural products, timber, steel and aluminum, automobiles, copper, semiconductors, and pharmaceuticals.
During his campaign, Trump expressed a desire for Bitcoin to be “mined, minted, and manufactured” in the U.S., and his tariff measures are inevitably set to impact the cryptocurrency industry. For instance, in January, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) updated its export controls on advanced computing semiconductors, adding entities from China and Singapore to its Entity List. These regulations target chips produced using “16nm/14nm nodes” or smaller processes, and they have also strengthened due diligence requirements for foundries. Such measures are likely to have a significant impact on mining equipment manufacturers, particularly those that rely on advanced semiconductors for their products.
2.Potential Impact of Trump’s Tariff Hikes on the Crypto Market
2.1 Impact on the Entire Crypto Market
In the short term, Trump’s tariff hikes have already had a negative impact on the crypto market. In January, Trump signed an executive order calling for the creation of a working group to establish clear regulations for U.S. cryptocurrency companies and explore the potential for creating a cryptocurrency reserve to support the development of cryptocurrencies. Following the announcement, the total market capitalization of cryptocurrencies grew to $3.65 trillion by the end of January, a 9.14% increase. However, in February, Trump’s tariff policy quickly offset the positive effects of the executive order, triggering a series of negative chain reactions in the cryptocurrency market. Particularly on February 3, after Trump announced long-term import tariffs on Canada, Mexico, and China, the cryptocurrency market began to fall in sync with the stock market. Bitcoin plunged 8% within 24 hours, Ethereum dropped more than 10%, and the total liquidations across the network exceeded $900 million, forcing 310,000 investors to liquidate their positions. Behind these market fluctuations was investor panic over the escalation of trade tensions and growing concerns about the global economic outlook.
From a macroeconomic perspective, trade tensions will lead to volatility in global markets, and the U.S. dollar, as a safe-haven asset, will become even more attractive. This will result in a capital inflow back to the U.S., strengthening the dollar and amplifying shocks in global capital markets. As investors’ risk appetite for high-volatility assets declines, cryptocurrencies are likely to be heavily sold off. Large funds and venture capital firms may also contribute to market volatility. If their equity positions decline, they may liquidate cryptocurrency holdings to manage risk. At the same time, tariff policies could trigger inflation, weakening consumer purchasing power and further dampening economic growth. In such an environment, investors are likely to shift towards safer asset classes, and cryptocurrencies, being high-volatility assets, will naturally be among the first to be sold off. This will lead to significant price drops, and the sentiment in the cryptocurrency market will consequently turn negative.
However, from a long-term perspective, Trump’s tariff hike policy may still have a positive impact on the cryptocurrency market, specifically in the following areas:
Firstly, the U.S. tariff hike policy may increase market liquidity. While implementing tariff policies, the Trump administration is likely to adopt expansionary fiscal policies, such as large-scale tax cuts and increased infrastructure investments. These policies could provide a short-term boost to the U.S. economy but would also exacerbate the fiscal deficit. To fill the funding gap, the government may resort to issuing bonds or implementing monetary easing policies to increase market liquidity, which would create a favorable environment for the cryptocurrency market. For example, in 2020, the Federal Reserve expanded its balance sheet by more than $3 trillion, and during the same period, Bitcoin saw an increase of over 300%.
Secondly, tariffs may drive up the prices of imported goods, and a depreciating dollar could push capital toward the cryptocurrency market. Eugene Epstein, head of trading and structured products at Moneycorp, stated that if a trade war leads to inflation weakening the dollar, Bitcoin could actually benefit. Over the long term, with the trend of a depreciating dollar, global investors may seek alternative assets to hedge against the risk of dollar depreciation, leading them to invest in Bitcoin and other inflation-resistant assets with fixed supplies. Additionally, some countries may choose to devalue their currencies to cope with the impact of tariffs, and in such cases, cryptocurrencies could become a channel for capital outflows.
Lastly, trade conflicts could intensify the de-dollarization trend, as tariff trade wars deepen the trust gaps between nations, encouraging countries to reduce their reliance on the U.S. dollar. For example, Russia and China have gradually reduced the use of the dollar in international trade, and countries in the Middle East have started experimenting with using the Chinese yuan or other currencies for energy settlements. In 2022, Iran even turned to Bitcoin mining to bypass oil export sanctions. This de-dollarization trend will drive up global demand for cryptocurrencies, presenting new development opportunities for the crypto market.
2.2 Impact on Investors
On the one hand, investors may need to optimize their portfolios. Cryptocurrencies are still considered speculative or high-risk/high-volatility asset classes. In the context of trade tensions escalating due to tariff policies, investors may need to reassess their portfolios, reduce exposure to volatile assets, and lower the proportion of high-risk investments such as cryptocurrencies, while ensuring an appropriate allocation to cash, government bonds, or other safe asset classes.
On the other hand, the frequent changes in Trump’s tariff policies affect investors’ stability expectations and undermine their confidence in investing. During his presidential campaign, Trump claimed to be the “President who supports innovation and Bitcoin,” announcing a comprehensive set of cryptocurrency-supportive policies. Before assuming office for his second term, he also publicly launched his personal meme coin, “$Trump.” After taking office, he continued to signal support for cryptocurrencies, including the establishment of a working group to study regulatory frameworks and a cryptocurrency reserve plan. However, the macroeconomic risks triggered by his tariff policies have offset the market’s positive expectations regarding these supportive policies. Starting in February, Trump introduced comprehensive tariff measures against China, Canada, and Mexico, and the tariff offensive became nearly reckless. The related policies were inconsistent, with a series of hastily announced decisions creating confusion in the economy and financial markets. This uncertainty has posed challenges for decision-makers, triggering concerns in the market. As a result, investor confidence may be shaken, forcing them to sell off cryptocurrencies or reduce new investments.
2.3 Impact on Relevant Businesses
Trump’s tariff policy has a multifaceted impact on cryptocurrency businesses, especially those in the mining supply chain. First, tariffs will affect hardware imports, increasing the cost for mining equipment manufacturers to acquire key components. This will raise production costs for mining machines and impact profitability, while also potentially hindering research and development efforts. Second, in the short term, there may be a shortage of mining equipment, leading to price increases. This will raise the cost for mining pool operators and mining companies to upgrade their equipment, significantly increasing their operational pressures. Third, in the long term, the tariff policy could lead mining equipment manufacturers and mining companies to relocate to regions less affected by the trade war, altering the geographic distribution of cryptocurrency businesses globally.
Secondly, tariffs will also impact cryptocurrency exchanges. First, tariffs could lead to global trade tensions, stock market volatility, or increased economic uncertainty. In such a context, some investors may view cryptocurrencies as a hedge, which could increase trading volume and attract more short-term traders into the cryptocurrency market. This could lead to a short-term rise in exchange trading volume and transaction fee income. Second, tariffs may trigger capital controls or foreign exchange restrictions, making cryptocurrencies a potential alternative channel for cross-border capital flows, which would drive an increase in deposit and withdrawal demands at exchanges. Third, the Trump administration may adjust the financial regulatory framework alongside tariff policies, strengthening scrutiny on cryptocurrencies, such as in areas like anti-money laundering (AML) and tax compliance. This could increase the operating costs and compliance pressures on exchanges.
Finally, tariffs will also impact the stablecoin market. In order to maintain profits, businesses will inevitably seek alternative solutions to bypass tariff barriers, and stablecoins may become one such option. In regions with strict capital controls, such as Asia and Latin America, USDT is the primary tool for circumventing dollar exchange restrictions. If tariffs lead to the depreciation of emerging market currencies (such as the Chinese yuan), local users may increase their holdings of USDT to hedge against risks, thus driving up demand for USDT. However, if U.S. sanctions target entities using USDT, this could threaten its liquidity. On the other hand, USDC, due to its higher compliance standards, is more commonly used for traditional institutional deposits and compliant DeFi protocols. If U.S. companies turn to cryptocurrency payments due to increased tariff costs, USDC may become the preferred settlement tool. If market risk-aversion sentiment continues to rise, institutional investors may also view USDC as a “safe stablecoin,” potentially eroding USDT’s market share.
3.Response Strategies for Different Stakeholders
3.1 The Overall Cryptocurrency Market
Tariff threats can trigger panic due to trade wars, sparking short-term risk-aversion sentiment. However, this panic is generally transient. Historical experience, such as during the U.S.-China trade tug-of-war in 2018, shows that the market’s response to sudden tariff policies typically evolves through three stages: “panic – digestion – recovery.” Initially, markets tend to panic, but over time, they usually adapt and stabilize. Markets generally have strong self-regulation capabilities and, relying on historical experience and policy trends, form stable expectations. Although the current tariff policies have caused short-term volatility in the market, as mentioned earlier, they will not lead to fundamental changes in the market in the long term. The cryptocurrency market will continue to attract investors who are optimistic about its development potential. These investors will buy during market downturns, providing stable support for the market.
3.2 Corporates
Firstly, for cryptocurrency businesses whose production and operations are affected by tariffs, they could consider expanding their supplier base to regions not impacted by tariffs, such as Southeast Asia, to avoid reliance on single supply chains from the U.S. or China. Additionally, under tariff pressures, they could consider establishing production bases in countries like the U.S. or Russia to reduce the impact of import tariffs.
Secondly, international traders and cryptocurrency businesses can flexibly use stablecoins for settlement, reducing the impact of trade policies on cross-border payments. They could even use DeFi protocols to bypass the limitations of traditional financial systems imposed by trade barriers.
Thirdly, cryptocurrency businesses can establish overseas subsidiaries or use offshore financing methods (such as in Singapore or Dubai) to avoid uncertain tariff and regulatory risks.
Finally, cryptocurrency businesses should also focus on compliance building, strengthen communication with government departments, and proactively safeguard and advocate for their rights and interests.
3.3 Individual Investors
First, investors can diversify their asset holdings and focus on risk management. In addition to investing in cryptocurrencies, they can also invest in traditional assets like stocks, bonds, and gold. This way, when the cryptocurrency market experiences significant volatility, other assets can hedge against the investment risk in cryptocurrencies, improving the robustness of the overall asset allocation.
Second, investors can adopt a long-term investment mindset (i.e., “HODL”) and avoid blindly chasing prices or selling during declines. Instead, they should be patient and wait for the market to recover and find the right entry points.
Third, by staying informed about industry trends and policy developments, investors will be able to make more informed investment decisions.
Fourth, even if investors suffer losses, they can minimize these losses through tax strategies such as capital loss deductions. For example, under U.S. tax law, any realized capital losses can be used to offset capital gains or ordinary income of the same type, which helps save significant tax expenses in the volatile cryptocurrency market. However, it’s important to note that these tax calculations can be complex and require a high level of expertise. In this case, given the high cost, inefficiency, and potential for errors in manual tax filing, individual investors might consider using FinTax for Individuals, a professional tax filing software. With just one click, users can securely, accurately, and quickly generate tax reports that meet the required standards by importing data from their crypto wallets or exchanges.
4.Summary and Outlook
The Trump administration’s tariff policy is a direct manifestation of trade protectionism, and it has created both direct and indirect impacts on the cryptocurrency market. In the short term, the liquidity tightening caused by tariff hikes may lead to a simultaneous decline in the crypto market. However, if the tariff policy persists, it could accelerate the decentralized transformation of the crypto industry in the long term, promoting stablecoins as a new medium for cross-border trade, which would have positive effects and lead to the creation of more compliant crypto financial products. In the current context, both businesses and individuals can adopt flexible strategies to cope with the impact of tariffs, seizing structural opportunities from negative effects and adjusting risk-aversion needs amid economic fluctuations, thereby achieving optimal benefits.