Cryptocurrency markets experienced a volatile rebound after initial panic over Trump’s tariff threats subsided. While Bitcoin initially plunged from $105,000 to $91,000 following Trump’s tariff announcements, prices recovered above $100,000 after temporary pauses on Mexican and Canadian tariffs were announced.
Speculation also surged due to leaks about a potential U.S. “strategic crypto reserve,” with analysts noting that Trump’s pro-crypto policies, including plans to prioritise XRP and Solana, fuelled optimism.
What Were Trump’s Tariffs on Canada, Mexico, and China?
Trump threatened a 25% tariff on all imports from Canada and Mexico, along with an “additional” 10% levy on Chinese goods, aiming to pressure these nations on border security and drug trafficking. The tariffs were framed as a response to “the invasion of undocumented migrants and drugs,” with Trump declaring, “It’s time for them to pay a very big price”. While less extreme than his campaign pledge of 60% on China, the proposals sparked fears of inflation and supply chain disruptions.
Responses from Affected Countries
Canada and Mexico swiftly negotiated temporary suspensions, with Mexico’s President Claudia Sheinbaum securing a 30-day reprieve and Canada emphasising their “mutually beneficial” trade relationship. China retaliated with counter-tariffs on U.S. imports, set to take effect February 10, 2025, warning that “no one will win in a trade war”. Canadian Finance Minister Chrystia Freeland stressed that U.S.-Canada collaboration on fentanyl interdiction was “essential,” while Ontario Premier Doug Ford called the tariffs “devastating”.
Crypto Market Reactions at the Time
Cryptocurrencies nosedived initially, with Bitcoin losing 12% and Trump’s own meme coin plummeting 75% from its peak. Ethereum, Dogecoin, and Solana also saw sharp drops. Analysts noted crypto’s growing correlation with macro trends: “Bitcoin is now a global macro asset class, exposed to the same liquidity constraints as tech stocks”. Meme coins, deemed “riskier,” faced steeper declines, including Melania Trump’s token, down 90%.
Trump’s Actions to Resolve Tariff Issues
Trump paused tariffs on Mexico and Canada after securing short-term border security agreements, framing the moves as “worth the price” to “make America great again”. His administration also hinted at bilateral trade deals to replace the USMCA, with negotiators leveraging tariffs as a “bargaining stick” rather than a final policy.
Broader Market Reactions
Currency markets swung wildly, with the Mexican peso and Canadian dollar tumbling against the U.S. dollar, while Asian stocks like Japan’s Nikkei fell 1.6%. Traders described “déjà vu” volatility, with Goldman Sachs warning of a “wild ride” in FX markets. U.S. stocks pared losses after tariff pauses, though analysts cautioned that prolonged trade tensions could reignite inflation and delay Fed rate cuts.
China’s Response to Tariff Threats
China condemned the tariffs as counterproductive, with spokesperson Liu Pengyu stating, “China-U.S. economic cooperation is mutually beneficial”. Beyond retaliatory levies, China hinted at strategic patience, noting Trump’s inconsistency in prior trade negotiations . However, its measured 10% counter-tariff, far below Trump’s 60% campaign threat, suggested a cautious approach to escalation.
The Next Big Market Catalyst
Investors are eyeing the potential approval of Solana ETFs and Trump’s proposed “strategic crypto reserve,” which could prioritise XRP and Solana. Speculation around SEC policy overhauls and a “flood” of crypto ETFs has driven Solana past $200, though analysts warn of “buy the rumour, sell the news” volatility.
Project 2025’s deregulatory agenda and efforts to dismantle post-Depression financial safeguards loom as long-term risks or they can be opportunities, depending on one’s stance. As one CEO noted, “XRP’s potential is clear” if Trump’s policies materialise. Adding to the momentum, David Sacks, President Trump’s Crypto Czar, will be hosting a press conference tomorrow at 2:30 PM ET on February 4th.
Written By Fazal Ul Vahab C H
