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A sledgehammer has fallen on global trade as the U.S. enacts sweeping new tariff measures, and the reverberations are shaking financial markets, especially the notoriously fickle cryptocurrency sector. Starting April 5th, a blanket 10% tariff has been slapped on nearly all import partners, with Canada and Mexico getting a temporary pass, as part of a push to claw back the nation's ballooning trade deficit.
To really crank up the pressure, "reciprocal" tariffs on roughly 60 nations, calculated at half their existing trade barriers on US exports, kick in on April 9th. China's getting hit with a hefty 34% levy, while other major players like the EU (20%), Vietnam (46%), Japan (24%), and India (26%) are also facing substantial increases. There's also a 25% tariff on all foreign-made cars, now in effect.
This move, justified by the administration as a national emergency due to the 2024 trade deficit topping $918 billion, instantly set off alarm bells in global markets. Asian stocks took a brutal beating. The Japanese Nikkei, at one point, plunged over 1,500 points, a 4% drop, pushing it below the 35,000 mark for the first time since August. South Korea's KOSPI wasn't far behind, shedding around 2.5% of its value.
Crypto Market Sees Sharp Swings
The impact on digital assets was particularly pronounced. The wider crypto market bled, with total market capitalization shrinking by 3.43% to $2.64 trillion at its lowest point, though its now at $2.68 trillion, a 1.37% decrease over the last day.
Bitcoin (BTC) initially spiked in a reflexive risk-hedging move but quickly reversed as broader market sentiment deteriorated. By the evening, BTC had dropped to an intraday low of $82,352. Ether (ETH) and Solana (SOL) saw even steeper declines, shedding over 3% each as risk aversion took hold.
"We anticipate continued pressure on risk assets in the near term," Valentin Fourner, lead analyst at BRN said. "Until there's greater clarity on the macroeconomic landscape, we’re taking a cautious approach. The uncertainty around tariffs and their ripple effects on global markets makes it difficult to justify chasing any short-term rallies in crypto," Fournier added.
Tariff Fallout and Investor Sentiment
The sweeping trade measures have reignited fears of a prolonged economic slowdown. The administration has framed the tariffs as a necessary step to protect domestic industries and address trade imbalances, with officials projecting significant revenue generation.
However, global market participants remain wary, concerned about retaliatory actions and potential disruptions to supply chains.
Traditional safe-haven assets moved in the opposite direction of crypto. Gold, which opened at $3,134 per ounce, climbed steadily to $3,152 by the close of trading, signaling a shift towards defensive positioning.
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