Featured Image Credit: Pool/Getty
Topics: Cryptocurrency, Bitcoin, Money, Donald Trump
Emily Brown
New tariffs announced by President Donald Trump against Canada, Mexico and China resulted in a drop of approximately $300 billion in the cryptocurrency market, and it's all because of their potential impacts.
Trump brought in the tariffs after he returned to the Oval Office on January 20, where, among other things, he set about tackling what the White House has described as an 'extraordinary threat posed by illegal aliens and drugs'.
A press release from the White House explained that this threat constitutes a national emergency, and to tackle it the new president has announced hefty tariffs against both neighboring and more distant countries.
In a bid to 'hold Mexico, Canada, and China accountable to their promises of halting illegal immigration' and prevent the flow of drugs into the US, Trump has imposed a 25 percent additional tariff on imports from Canada and Mexico, and a 10 percent additional tariff on imports from China.
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These tariffs are expected to impact everyday, real-world items such as cell phones, liquor and gas, but they're also having an impact on the digital world.
According to Forbes, crypto prices dropped around $300 billion from the combined market in the wake of Trump's introduction of the tariffs.
Bitcoin alone was down almost 10 percent at its lowest as it plunged overnight from February 2-3, dropping to just over $91,000 before it bounced back to around $95,000 - but that was one of the more positive stories of the crypto impacts.
Ethereum suffered even more as it dropped around 20 percent before recovering slightly, though the crypto Solana, which is a big competitor for ethereum, dropped by just six percent.
Explaining why the tariffs have caused this crash, Nick Forster, Founder of Derive.xyz, told FXStreet: “The recent tariffs imposed by Trump are likely to lead to increased inflation, which could dampen investor sentiment in crypto markets.”
Forster went on to explain that an increase in inflation may cause an increase in interest rates, which historically has been known to result in less favorable conditions for cryptocurrencies.
Petr Kozyakov, chief executive crypto payment platform Mercuryo, told Forbes that Trump's announcement about the tariffs on January 31 unleashed a 'tidal wave of fear, uncertainty and doubt' across the cryptocurrency market.
“The prospect of prolonged higher interest rates has rattled all global markets," he said. "While bitcoin has dropped below the $100,000 mark the King of Crypto is once again proving itself to be in a class of its own in marked contrast to altcoins bleeding dark red across the board.”
Joining the discussion, investment expert Jeff Park took to Twitter to argue that the tariffs might actually prove beneficial for bitcoin in the long run.
In a post on the platform, he wrote: “Tariffs might be just a temporary tool, but the permanent conclusion is that bitcoin is not only going higher—but faster. While both sides of the trade imbalance equation will want bitcoin for two different reasons, the end result is the same: higher, violently faster—for we are at war.”