- The Origins of the Tariff War
- The Escalation of the Conflict in 2025
- Consequences and Outlook
- Short-Term Impact on Cryptocurrency Prices
- Long-Term Effects on the Crypto Market
- Impact on Investors and Market Behavior
The tariff war between the United States and China has become one of the most significant economic confrontations of the 21st century. Beginning in 2018, it has had a profound impact not only on the economies of both nations but also on global trade as a whole. The conflict centers around reciprocal import tariffs aimed at protecting domestic industries and addressing long-standing trade disputes.
The Origins of the Tariff War
The use of tariffs as a tool to address trade imbalances and apply economic pressure is not new. However, the scale and global impact of the U.S.–China dispute stand out due to the size of the economies involved.
Background and Causes
Before 2018, the United States had repeatedly expressed concern over its growing trade deficit with China—the gap between Chinese imports and American exports. By 2017, this deficit had reached roughly $375 billion, sparking growing concern in Washington.
In addition, the U.S. accused China of:
·Intellectual property violations in China,
·Forced technology transfers from U.S. firms to Chinese partners,
·Heavy state subsidies for Chinese industries, and
·Market access barriers for American companies.
These grievances prompted the Trump administration to implement protectionist measures in the form of import tariffs.
The Beginning of the Conflict in 2018
n March 2018, the U.S. announced 25% tariffs on $50 billion worth of Chinese electronics and other goods. China responded within months with retaliatory tariffs on approximately $34 billion worth of American products.
By July and September of the same year, both sides expanded their tariff lists—raising rates and expanding the list of affected goods.
This tit-for-tat escalation created widespread uncertainty in global markets.
Development and Escalation (2018–2019)
The trade war went through several major phases:
1.Tariff Expansion: The U.S. imposed duties on a wider range of goods, including steel, aluminum, and electronics, while China targeted agricultural products and machinery.
2.Negotiations and Setbacks: Both countries entered rounds of trade talks, achieving temporary concessions but failing to resolve core disagreements.
3.Phase-One Agreement: In January 2020, the two sides signed a Phase One deal in which China agreed to increase imports of U.S. goods and make limited structural reforms, while the U.S. suspended or reduced some tariffs.
Economic Impact
– For the U.S.: Tariffs temporarily boosted competitiveness in sectors like steel and aluminum but raised production costs for manufacturers reliant on Chinese components.
– For China: Export restrictions, particularly on agricultural and industrial goods, weighed heavily on producers and employment.
The Escalation of the Conflict in 2025
In February 2025, during Donald Trump’s second presidential term, the U.S. intensified trade pressure—raising tariffs to 10%, then 20–30% on most Chinese imports.
China retaliated with tariffs of up to 125% on a range of American goods, sharply worsening the conflict and disrupting global supply chains
This escalation severely strained bilateral trade relations and heightened business uncertainty in both countries.
Consequences and Outlook
The tariff war has led to fragmentation of global supply chains and rising trade barriers, affecting not only the U.S. and China but also numerous other economies linked to their networks.
Despite periodic attempts at diplomatic dialogue, tensions remain high. A comprehensive agreement that could restore free trade conditions has yet to be reached.
Impact on the Crypto Market
The U.S.–China tariff war significantly influences the cryptocurrency market, triggering both short-term price volatility and long-term structural shifts in the digital asset ecosystem.
Short-Term Impact on Cryptocurrency Prices
Escalations in trade tensions—especially the introduction of new or higher tariffs—often lead to sharp drops in cryptocurrency prices. For instance, after the U.S. announced a 104% tariff on Chinese imports, Bitcoin briefly fell below $76,000, Ethereum dropped over 10%, and the total crypto market capitalization shrank by hundreds of billions of dollars. Such reactions reflect a broader investor flight from riskier assets during periods of trade instability and global uncertainty.
When tariffs rise and economic ambiguity grows, volatility increases across all markets—including digital assets. In such times, investors tend to reduce exposure to cryptocurrencies, viewing them as risk-on assets.
Long-Term Effects on the Crypto Market
A prolonged trade war could drive deep structural changes in the crypto economy:
– Rising Mining Costs: China remains a key supplier of rare earth elements and components for mining hardware. Trade restrictions and export limits make mining equipment more expensive, lowering profitability, shifting global hash power distribution, and raising entry barriers for new participants.
– Macroeconomic Inflation: Higher tariffs increase import prices and may intensify inflation in major fiat currencies. This dynamic strengthens demand for Bitcoin and other cryptocurrencies as “digital gold” and inflation hedges.
– Institutional Reassessment: Economic instability forces institutional investors to reevaluate risk. Many may favor long-term assets with real utility over speculative positions, influencing the structure and maturity of the crypto market.
Impact on Investors and Market Behavior
During trade war flare-ups, investors often retreat to safe-haven assets—bonds, the U.S. dollar, and gold—triggering large-scale crypto selloffs. Announcements of new tariffs frequently lead to mass liquidations, including futures positions, amplifying volatility.
However, once trade tensions begin to ease, the crypto market tends to recover quickly, sometimes even showing strong bullish momentum. This rebound is driven by investors viewing cryptocurrencies as alternatives to traditional assets and effective tools for portfolio diversification.
