President Donald Trump has officially imposed tariffs on three major trading partners: Canada, Mexico, and China. This decision immediately sent shockwaves through the financial markets, triggering a massive sell-off in the crypto space. As the U.S. Federal Reserve (Fed) downgraded its economic growth forecast, market pressure continues to intensify.
Global Impact: How Are Canada, Mexico and China Responding?
Within hours, the U.S. officially implemented new tariffs on its top three trading partners, marking a significant escalation in Trump’s trade policies. Canada and Mexico now face a 25% tariff after 30 days of unsuccessful negotiations, while China is subject to an additional 10% tariff, bringing its total import duty to 20%.
Responses from affected countries:
- Canada: Prime Minister Justin Trudeau strongly opposed the decision, arguing that it would severely damage the regional trade system.
- Mexico: The Mexican government expressed concerns that the tariffs would significantly impact its automotive and electronics export industries.
- China: Beijing is expected to retaliate aggressively, further escalating tensions between the world’s two largest economies.
Stock Market Collapse – Crypto Not Spared
Immediately after the tariff announcement, the U.S. stock market plummeted. Major indices, including the Dow Jones, S&P 500, and Nasdaq, all turned red.
While many believed the crypto market would remain unaffected, Bitcoin followed suit, experiencing a sharp decline. Within 24 hours, Bitcoin dropped from $95,000 to $86,062, wiping out its early-week gains.
Bitcoin and Altcoins Crash Investor Panic Ensues
Ethereum (ETH) saw a steep 15% decline, falling from $2,550 to $2,130, while leading altcoins such as XRP, SOL, and ADA plunged between 15-20%, signaling widespread selling pressure across the market. This decline resulted in an 11% drop in the total crypto market capitalization, falling from nearly $3.3 trillion to just $2.9 trillion, marking its lowest level in months.
Amid market turbulence, Bitcoin Dominance rose to 58%, reflecting a shift as investors sought safety in Bitcoin rather than altcoins. Meanwhile, the Fear & Greed Index dropped to 15, indicating an “extreme fear” sentiment prevailing in the market. According to data from CoinGlass, $810 million in derivatives positions were liquidated within 24 hours, primarily from overleveraged long traders. This suggests that investors were overly optimistic before the market correction hit.
Fed Cuts Growth Forecast
Beyond the tariff pressure, financial markets are also grappling with a gloomy economic outlook from the Fed. The Atlanta Fed slashed its Q1 2025 GDP growth projection from -1.5% to -2.8%, a drastic drop from the +3.9% forecast just four weeks earlier. If economic growth continues to weaken, experts fear that capital will keep flowing out of riskier assets like crypto.
Retaliatory Moves: Will the Market Bounce Back?
In response to the U.S. tariffs, China may deploy a range of countermeasures aimed at putting pressure on the American economy:
- Imposing tariffs on U.S. goods, particularly agricultural and tech products.
- Reducing purchases of U.S. Treasury bonds, potentially driving up Washington’s borrowing costs.
- Accelerating its “de-dollarization” strategy in global trade.
Meanwhile, Canada and Mexico are also considering their options, which may include retaliatory tariffs on American goods or seeking new trade partnerships to reduce their dependence on the U.S. economy.
Crypto Investment Strategies Amid Market Volatility
Given the current uncertainty, crypto investors must closely monitor Fed policies and global economic reactions to adjust their strategies accordingly. Effective risk management is more crucial than ever, particularly by avoiding excessive leverage to prevent significant losses during volatile market conditions. Additionally, if the altcoin downturn persists, shifting investments into safe-haven assets like stablecoins or Bitcoin could help investors preserve capital and mitigate risk.
With global economic risks looming, investors must adopt sound strategies to protect their assets. Stay updated with the latest insights from MevX to navigate the crypto market with confidence!
