Crypto Update | Will Trump's Tariffs Tank the Crypto Markets?

Summary

Markets Daily Crypto Roundup: Crypto Update | Will Trump's Tariffs Tank the Crypto Markets?

Release Date: February 26, 2025
Host: Jen Senasi, CoinDesk

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Introduction

In the February 26, 2025 episode of Markets Daily Crypto Roundup, hosted by Jen Senasi from CoinDesk, the focus centers on the impending tariffs imposed by former President Donald Trump and their potential ramifications on the global economy and cryptocurrency markets. This episode delves into the economic tensions between the United States, Canada, and Mexico, and analyses how these geopolitical maneuvers might influence the volatile world of crypto.

Trump's Tariffs: An Overview

The episode opens with a clip of Donald Trump addressing the press at the White House:

“We're on time with the tariffs and it seems like that's moving along very rapidly. We've been mistreated very badly by many countries, not just Canada and Mexico. We've been taken advantage of.”
— Donald Trump [00:00]

Jen Senasi outlines Trump's recent executive actions:

• Tariff Implementation: On February 1st, Trump signed executive orders imposing a 25% tariff on products from Mexico and Canada, including a 10% duty on Canadian energy exports.
• Rationale: The administration cited concerns over fentanyl flows and illegal immigration as primary reasons for these measures.
• International Response: In retaliation, Canada and Mexico announced their own tariffs on American imports. However, these were temporarily paused following commitments from Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau to enhance border policing.

Economic Implications for the US, Canada, and Mexico

The tariffs have stirred significant economic discourse. Jen references insights from the Brookings Institution:

• Economic Blow: The tariffs are projected to harm the economies of the US, Canada, and Mexico by disrupting trade relationships.
• Supply Chain Security: They could hinder the US’s efforts to develop more secure supply chains and compete with China.
• Long-term Consequences: Beyond the immediate economic impact, the tariffs may have enduring diplomatic and strategic repercussions.

Expert Insight:

“The economic consequences of a protracted trade conflict would be severe, but it would be a very different shock than the COVID-19 shock.”
— Economic Analyst [01:30]

Bank of Canada Governor Tiff Macklem elaborates on the potential long-term damage:

“The Canadian economy would suffer permanent damage if the tariffs are implemented.”
— Tiff Macklem [01:55]

Mexican President Sheinbaum remains optimistic about reaching an agreement with Trump and hints at imposing levies on Chinese goods to secure a deal.

Impact on Cryptocurrency Markets

The discussion transitions to the possible effects of these tariffs on crypto markets, featuring insights from CoinDesk senior editorial analyst James Van Stratton and Bank of Canada Governor Tiff Macklem.

Bitcoin's Performance:

Governor Macklem shares his analysis of Bitcoin's recent movements:

“Bitcoin just broke below a key metric. The short-term holder realized price at 91,000 and the 200-day moving average sits at about 81,82,000.”
— Tiff Macklem [03:04]

He contrasts his expectations with the market's outcome:

“I was expecting it to break, but I was actually expecting it to rate to the upside as a permeable. But we got the downside break of the channel.”
— Tiff Macklem [02:33]

Market Sentiment and Liquidity:

Van Stratton discusses the broader market reactions:

“Trump said that the tariffs would make the US extremely liquid and rich. Again, when you hear this, what do you make of it?”
— James Van Stratton [03:33]

Governor Macklem responds by highlighting the current economic indicators:

“The market's telling us it's not inflationary. We had a massive services print in the US Last week where it showed contraction, and that's being reflected in the markets.”
— Tiff Macklem [03:33]

He further explains the interconnectedness of global economies:

“Everything's so interconnected. Western economies are experiencing inflation while China is undergoing deflation, creating a 'tale of two economies.'”
— Tiff Macklem [04:42]

Expert Perspectives and Analysis

Governor Macklem provides a nuanced view of the tariffs:

“Tariffs are ultimately attacks on the workers, so I don't think they're great... It's so hard to tell. It's such short-term policies and negotiations are still going on.”
— Tiff Macklem [06:03]

He emphasizes the uncertainty surrounding inflation, GDP growth, and employment across the US, Canada, and Mexico, stressing the complex landscape that crypto markets must navigate.

Cryptocurrency Market Dynamics

The conversation delves deeper into how tariffs and economic policies influence crypto:

Decoupling of Crypto Assets:

Governor Macklem observes a divergence between Bitcoin and other cryptocurrencies:

“We are seeing a massive decoupling between Bitcoin and crypto prices. Solana is about 50% off its highs, stemming from meme coin action in recent weeks.”
— Tiff Macklem [06:56]

He attributes bearish sentiments in the crypto industry to external market perceptions that may not differentiate between Bitcoin and other crypto assets.

Liquidity and the Dollar Index:

Governor Macklem highlights the significance of the dollar index:

“The dollar index is incredibly strong. If we can get it heading back down to 100, that would give some bullish sentiment for crypto.”
— Tiff Macklem [08:18]

He draws parallels to the first presidential term's impact on the dollar and subsequent bull market in 2017.

Investor Guidance

Addressing investor concerns, Governor Macklem advises monitoring key economic indicators:

“I think it's all liquidity-driven and that's kind of evaporated at the moment.”
— Tiff Macklem [08:18]

He underscores the importance of the dollar's trajectory in shaping crypto market trends.

Counterarguments and Broader Market Influences

Responding to critiques that tariffs may not directly influence crypto prices, Governor Macklem argues that crypto behaves as a macro asset intertwined with traditional financial uncertainties:

“Crypto kind of trades as a macro asset. So if there's uncertainty in traditional finance, there's going to be uncertainty in crypto.”
— Tiff Macklem [09:04]

He emphasizes the multitude of factors affecting crypto markets, including geopolitical tensions, inflation rates, and economic growth metrics.

Conclusion

Jen Senasi wraps up the episode by summarizing the potential fallout of Trump's tariffs:

The looming tariffs on Canada and Mexico could have far-reaching economic consequences, impacting trade relationships, inflation, and even crypto markets. While some argue that these policies have little to do with Bitcoin's price movements, uncertainty in global markets often fuels volatility across all asset classes. We'll continue to monitor these developments and their implications for investors.

Stay tuned to Markets Daily Crypto Roundup for ongoing updates on the most significant stories shaping the crypto landscape.

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Notable Quotes:

• “We're on time with the tariffs and it seems like that's moving along very rapidly.” — Donald Trump [00:00]
• “The economic consequences of a protracted trade conflict would be severe...” — Economic Analyst [01:30]
• “Bitcoin just broke below a key metric...” — Tiff Macklem [03:04]
• “Crypto kind of trades as a macro asset...” — Tiff Macklem [09:04]

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Key Takeaways:

1. Tariff Implementation: Trump's tariffs on Canada and Mexico aim to address illicit activities and immigration but risk damaging economic ties with key allies.
2. Economic Impact: Experts warn of severe and long-lasting economic repercussions for the US, Canada, and Mexico, including hindered supply chains and stunted growth.
3. Crypto Market Influence: While tariffs themselves may not directly affect crypto prices, the resulting economic uncertainty contributes to market volatility and bearish sentiments.
4. Investor Strategy: Monitoring the dollar index and understanding liquidity trends are crucial for investors navigating the crypto space amidst geopolitical tensions.

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For comprehensive insights and daily updates on cryptocurrency markets, subscribe to CoinDesk's Markets Daily Crypto Roundup.

Transcript

[Donald Trump]

We're on time with the tariffs and it seems like that's moving along very rapidly. We've been mistreated very badly by many countries, not just Canada and Mexico. We've been taken advantage of.

[Jen Senasi]

You're Watching Markets Daily, hosted by me, Jen Senasi. On this show, we take a look at the biggest news headlines and explore the impact that they have on crypto markets.

[James Van Stratton]

We just heard a clip from US.

[Jen Senasi]

President Donald Trump who, who said on Monday at a White House press conference that tariffs against Canada and Mexico will go forward after a month long delay expires next week. Now if things are just moving way too fast for you and you need to catch up, here's what you need to know. Trump signed executive orders on February 1st imposing 25% tariffs on products from Mexico and Canada and 10% duties on Canadian energy. The administration said the tariffs were to address flows of fentanyl and illegal immigration.

[Tiff Macklem]

Immigration.

[Jen Senasi]

In retaliation, both Canada and Mexico announced their own tariffs on American imports. But just days after the announcement, the tariffs were put on pause after Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau pledged to boost border policing efforts. Now, as you know, Canada and Mexico are two of America's closest allies and trading partners. And according to the Brookings Institution, the tariffs would be a blow to all three economies. They would impede the US's ability to develop more secure supply supply chains and compete with China and would have substantial economic, diplomatic and strategic consequences.

[Economic Analyst]

The economic consequences of a protracted trade conflict would be severe, but it would be very different, a different, a very different shock than the COVID 19 shock. In the pandemic. We had a steep recession followed by a rapid recovery as the economy reopened. This time if tariffs are long lasting and broad based, there won't be a bounce back.

[Jen Senasi]

That was bank of Canada Governor Tiff Macklem during a speech to members of the Mississauga Board of Trade on Friday. He said that the Canadian economy would suffer permanent damage if the tariffs are implemented, while Mexico's President Sheinbaum said on Monday that she was optimistic about reaching an agreement with Trump and even hinted at possible levies on China goods to secure a deal. So what does this mean for all three economies and how might this affect crypto markets? Joining Me now is CoinDesk senior editorial analyst James Van Stratton to chat more.

[Tiff Macklem]

Hey Jen, how are you doing?

[James Van Stratton]

I am doing a lot better than the markets are doing, let's just put it that way.

[Tiff Macklem]

Yeah, it was, I think it's. I did an article about Bitcoin breaking its channel, which we've been in since end of November, that 90,000 to 110,000 range. And I was expecting it to break, but I was actually expecting it to rate to the upside as a permeable. But we got the downside break of the channel. So, yeah, we've now got to recalibrate and see where Bitcoin will level off, and then we have to adjust and go from there.

[James Van Stratton]

I think a lot of people who watch this show are permeables. I am also a permeable. And if you look at the news headlines, there's a lot of attribution to how the markets are reacting to these tariffs. I want to read a quote from Trump's conference on Monday. He said that the tariffs would make the US Extremely liquid and rich. Again, when you hear this, when you see this quote, what, what do you make of it?

[Tiff Macklem]

Yeah, I think there's a few arguments if you look at tariffs, if they could be inflationary or not inflationary. But I think at the moment the market's telling us it's not inflationary. We had a massive services print in the US Last week where it showed contraction, and that's being reflected in the markets. You've got bond yields down. I think the US 10 year, last time I checked, was at 4.3%. So growth really isn't a thing at the moment. And I think that can start to be rolled back. So, yeah, that's something that is a concern for the market. And if you've got a very robust and solid inflation print above 3% and maybe unemployment spiking or I don't know if it can stay low, then you're looking at a period of stagflation, which is the biggest concern for central banks.

[James Van Stratton]

So what I'm hearing is there's a lot of uncertainty when it comes to inflation. Gdp, jobs, and we're looking at the us, Canada, Mexico. Help me make sense of this. What does this tell us about where the economy is heading in each of the three countries?

[Tiff Macklem]

I. I think it's there. I think we're so globalized now. Everything's so interconnected. It's interesting that you've got kind of an inflationary Western environment with all the Western economies. And then you've got the opposite with China, which is going through massive amounts of deflation. And it was interesting being in Hong Kong in consensus, just speaking to people from Hong Kong and seeing how China's deflation actually is. Is leaking into Hong Kong and how property prices have actually started to go down. But you've obviously got the inverse going on in Western economies where house prices have done nothing but go up. So you've got a real tale of two economies. You've got so much geopolitical uncertainty as well that causes a massive concern. So I think you've got Trump trying to put a peace deal together with Ukraine. Europe and especially the UK are very adamant on not these terms. So again, that uncertainty kind of feeds into the market as well. The longer these answer, these geopolitical events continue.

[James Van Stratton]

You spend a lot of time looking at the markets. I got to ask you, what you, what you think of this plan? Do you think we're actually going to see tariffs on Canada and Mexico and what does that mean? Like, is this a good plan? What, what could Trump possibly be thinking? What can we expect in the short term and midterm?

[Tiff Macklem]

I think tariffs are ultimately attacks on the workers, so I don't think they're great. But again, it's, it's so hard to tell. It's so short term policies and negotiations are still going on. So I think again, that feeds into the uncertainty. But I think you're in such a corner when you've got $2 trillion deficits, you want to try and cut spending with the dodge the doge program. So I don't know how many tools the US Administration have and they're going with the tariffs. So yeah, it's probably a concern on growth with these tariffs.

[James Van Stratton]

Okay, now if we narrow the conversation, we talk about crypto markets, how can we expect markets to react? Do you expect to see them to continue to go down? If these tariffs are put in place, what happens?

[Tiff Macklem]

I don't think tariffs are the be all and end all. I think it's more liquidity. The tariff determines crypto. But I think we are seeing a massive decoupling between bitcoin and crypto prices. I think Solana is about 50% off its highs and that's obviously stem from the meme coin action that we've seen in recent weeks. And I think that kind of action kind of gives bearish sentiment into the industry, especially from outsiders that can't really maybe deviate or differentiate between bitcoin and crypto. So I think bitcoin's been taken down. It was trading in a three month range and it, and I said that it kind of needed to break this range at some point. Being a permeable, I thought, yes, that will be to the upside, it was to the downside. So we just got to see how the market Oscillates Now. Bitcoin just broke below a key metric. The short term holder realized price at 91,000 and the 200 day moving average sits at about 81,82,000. And there's not a lot of supply that sits between seventy thousand and ninety thousand dollars. Because obviously in November when bitcoin went up during the US election, we just didn't stop, we just went up. So there was no supply sitting in this range now. So that's the concern for the downside.

[James Van Stratton]

And what does this mean for investors? What should folks be watching?

[Tiff Macklem]

I think the dollar index still provides key clarity at 106. It's incredibly strong. I think if we, if we can, if the dollar is mirroring the first presidential term and that's kind of that, that gave us the bull market in 2017. So the dollar is down from 110 to 106. It's a lot, but we really need it to start heading back down to 100. That would give some bullish sentiment for, for crypto, but again, I think it's all liquidity driven and that's kind of evaporated at the moment.

[James Van Stratton]

And I think I know what your answer is going to be here, but Jeff Pasquino wrote something on X. I want to get your thoughts on it. He said these tariffs have little to nothing to do with borderless crypto prices. How would you respond to that?

[Tiff Macklem]

Yeah, but I think the issue is that crypto kind of trades as a, as a macro asset. So if there's uncertainty in tradfi, there's going to be uncertainty in crypto. I think that's just the nature of the beast now. So we have to take the rough with the smooth. And I think there are way more issues, not just tariffs, it's the geopolitical uncertainty, inflation, lack of growth. So there's so many factors now stemming in this market.

[Jen Senasi]

All right, that's a wrap for Markets Daily today. The looming tariffs on Canada and Mexico could have far reaching economic consequences, impacting trade relationships, inflation, and even crypto markets. While some argue that these policies have little to do with Bitcoin's price movements, uncertainty in global markets often fuel volatility across all asset classes. We'll be keeping a close eye on how this unfolds and what it means for investors now. Be sure to subscribe and follow for more updates on the biggest stories shaping the crypto markets. Thank you for watching. I'm Jen Senassi and we'll see you next time.