Bitcoin has experienced a significant drop, falling below $100,000 for the first time since January 27. This decline comes shortly after former US President Donald Trump imposed new import tariffs on goods from China, Canada, and Mexico, leading to retaliatory actions from these countries.
Trump’s Tariff Strategy and Its Immediate Impact
In a statement on February 1, the White House revealed that Trump had signed an executive order imposing a 25% tariff on goods imported from Canada and Mexico, along with a 10% tariff on imports from China. The move is part of Trump’s broader agenda to address concerns over illegal immigration and the flow of dangerous drugs, including fentanyl, into the United States. The administration has justified the tariffs as a means of holding these countries accountable.
Additionally, the order specifies that energy resources from Canada would be subject to a reduced tariff of 10%.
Global Reactions to Trump’s Tariff Move
The response from the affected countries was swift. Canada’s Prime Minister Justin Trudeau announced a 25% tariff on $106.5 billion worth of US goods. China’s Ministry of Commerce signaled its intention to file a complaint with the World Trade Organization (WTO) and hinted at retaliatory measures. Meanwhile, Mexican President Claudia Sheinbaum instructed the country’s Secretary of Economy to implement a series of countermeasures, including tariffs and other measures to protect Mexico’s economic interests.
These retaliatory actions triggered an immediate market response, with Bitcoin’s value dipping below the crucial $100,000 mark. At the time of writing, the cryptocurrency is trading at approximately $99,540.
How Tariffs Could Influence Inflation and Market Sentiment
The tariffs have the potential to drive up inflation in the US, which could lead to higher interest rates. Higher interest rates typically result in investors pulling their money out of riskier assets like cryptocurrencies and redirecting it toward more stable investments such as bonds and term deposits. As a result, Bitcoin’s recent price drop could be a reflection of this broader market shift.
Bitcoin’s Struggle and Market Sentiment
Following the announcement of the tariffs, Bitcoin’s price fell to $99,111, marking its lowest point since late January. In the four-hour period leading up to the price drop, about $22.7 million in long positions were liquidated, according to CoinGlass data.
The crypto community remains divided on the potential long-term effects of the tariffs. Some experts, such as Dan Gambardello, founder of Crypto Capital Venture, downplay the idea that Trump’s tariff policies or his “memecoins” will mark the end of Bitcoin’s bull market. Gambardello argues that despite short-term price fluctuations, institutional investors like BlackRock continue to accumulate Bitcoin and Ethereum.
Diverging Views on the Future of Bitcoin Amid Tariff Wars
On the other hand, some analysts, like Jeff Park from Bitwise Invest, suggest that a prolonged tariff war could benefit Bitcoin in the long term. However, there are also critics, such as Adam Cochran from Cinneamhain Ventures, who believe that Bitcoin is not immune to global market conditions. Cochran argues that Bitcoin now behaves similarly to highly leveraged tech stocks and is likely to suffer during periods of global economic turmoil.
As the global economic landscape shifts, it remains to be seen how Bitcoin will react to the ongoing trade tensions and whether the cryptocurrency can regain its momentum in the face of rising tariffs and inflation concerns.