Anndy Lian
Economic crosscurrents: Tariffs, politics, and the crypto conundrum
Lately, the mood among investors worldwide has been pretty cautious. When we talk about global risk sentiment being subdued, it’s akin to saying people are tiptoeing around, unsure about where to invest their money.
They’re not exactly jumping into risky investments with both feet. Why? A significant portion of that hesitation stems from the drama surrounding trade tariffs.
The United States is flexing its muscles with new tariff threats, and the European Union is gearing up to push back. This tug-of-war is causing widespread anxiety, and it’s having a ripple effect on markets in some particularly interesting ways.
Stocks might look shaky if trade wars intensify, bonds could become appealing if people start playing it safe, and then there’s this wild card: cryptocurrencies, bucking the trend and shooting up. It’s a lot to unpack.
Trade tariffs: The US vs EU showdown
At the heart of this uncertainty is a bold move from the US. Treasury Secretary Scott Bessent dropped a bombshell, stating that as of August 1, the US plans to impose high tariff rates on imports from various countries. His logic? It’s a pressure tactic. He figures that by increasing the cost of doing business with the US, other nations will rush to the negotiating table with better trade deals. It’s a classic power play: turn up the heat and see who blinks first.
But the European Union isn’t sitting quietly. EU diplomats are hinting that they’re not thrilled with how things are going. The chances of striking a trade deal with the US that everyone can live with are slipping away. So, they’re devising countermeasures, such as retaliatory tariffs or other economic measures.
This isn’t just a little spat. It’s shaping up to be a full-on trade standoff, and the stakes are high. When two economic giants, such as the US and the EU, start squaring off, it rattles global markets. Companies that rely on smooth trade flows get jittery, supply chains could get snagged, and prices for all sorts of goods might climb. That’s the kind of uncertainty that keeps investors up at night.
Bessent’s strategy might work in the short term, but some countries could cave and offer sweeter deals. But it’s a gamble. If the EU digs in and fires back, we could see a spiral of tit-for-tat tariffs that drags down global growth. It’s bold, but it’s risky, and markets hate that kind of unpredictability.
How markets are reacting
Let’s zoom in on what’s happening in the US markets, because they’re giving us some big clues about how investors are feeling. The equity markets wrapped up with a mixed bag. The S&P 500 nudged up by 0.14 per cent, and the NASDAQ climbed 0.38 per cent, thanks to heavy hitters in big tech holding strong.
Meanwhile, the Dow Jones slipped slightly, down 0.04 per cent. What’s that telling us? Tech stocks are still the darlings, shrugging off some of the trade noise, while other sectors, like industrials in the Dow, aren’t feeling as chipper.
Then there’s the bond market. The 10-year US Treasury yield dropped four basis points to 4.38 per cent, and the two-year yield eased 1 basis point to 3.86 per cent. Lower yields mean bond prices are up, and that’s a classic sign of a “flight to safety.” When people are worried, they pile into Treasuries, figuring they’re a safe bet compared to stocks or other riskier investments. It’s like putting your money under the mattress, but with a little interest.
The US Dollar Index also took a hit, falling 0.64 per cent. That’s partly because those sliding Treasury yields make the dollar less attractive. If you’re not earning as much on US bonds, why hold dollars? Gold, on the other hand, jumped 1.3 per cent. That’s no surprise, gold loves a good crisis. When the world feels shaky, people turn to it as a safe haven. Brent crude oil, though, stayed flat at US$69 a barrel. Oil’s holding steady, which suggests energy markets aren’t panicking just yet.
My view here is that we’re seeing a split personality in the markets. Tech stocks are hanging tough, but the rush to bonds and gold shows there’s real unease bubbling underneath. The dollar’s tumble might hint at doubts about the US tariff plan paying off. It’s a messy picture, but it’s fascinating to watch unfold.
Asia steps into the spotlight
Now, let’s hop over to Asia, where Japan’s political scene is adding its flavour to this global stew. Prime Minister Shigeru Ishiba got a rough wake-up call when his Liberal Democratic Party and its coalition partner Komeito lost their majority in the Upper House election on July 20. That’s a big deal. Losing control like that shakes up the political landscape.
The USD/JPY exchange rate tanked 0.96 per cent, dropping from a high of 147.08. A weaker dollar against the yen often ties back to uncertainty, and Japan’s political wobbles are stirring the pot.
Ishiba’s sticking to his guns, saying he’ll keep leading despite the loss. But a fractured coalition could mean trouble pushing through policies, especially on the economic front. That uncertainty hit the yen hard, and it’s got traders watching closely. Still, Asian equity markets mostly rose, with Japanese stocks rebounding in a relief rally. It’s like investors are betting that the chaos might not be as bad as it looks, or at least, not yet.
I think Japan’s situation is a wildcard. Political instability could spook markets more if Ishiba can’t steady the ship. But that relief rally suggests some optimism that things won’t fall apart completely. It’s a delicate balance, and it’s worth keeping an eye on.
Bitcoin and crypto: The wild ride
Okay, now let’s talk about the elephant in the room. Bitcoin and the crypto market. While traditional markets are fretting over tariffs and politics, Bitcoin’s on a tear, blasting past its old highs to hit US$118,000. That’s not just a number: it’s a statement.
This surge wiped out over US$1 billion in short positions, meaning many individuals betting against Bitcoin suffered significant losses. The US$100,000 mark was a mental hurdle, and once it broke through, the mood shifted. Profit-takers stepped aside, and buyers with big dreams stepped in, pushing the price higher.
What’s driving this? Part of it ties back to companies like Strategy, run by Michael Saylor. They’re doubling down on Bitcoin, raising US$500 million through preferred equity sales to scoop up more coins. They’re offering Series A Perpetual Stretch preferred stock, worth US$5 million, with a nine per cent dividend, priced at a discount between US$90 and US$95 per share.
It’s a creative move, and it’s paying off. Strategy’s common shares popped 0.4 per cent to $428 after hours, and their recent share increases have raked in US$119 billion, with US$71 billion of that fuelling Bitcoin buys. Saylor’s all-in on this, and it’s boosting confidence in the crypto space.
Other cryptocurrencies are also riding the wave. Ethereum cracked US$3,000, and coins like Solana, XRP, and Binance Coin are up. Even memecoins, which had been quiet, are perking up. Bitcoin’s dominance dipped from 66 per cent to 64.3 per cent, showing altcoins are stealing some of the spotlight. A trader named Bluntz thinks SPX6900 could hit its all-time high soon, which could spark more meme madness.
Bitcoin’s run feels like a rebellion against the gloom in traditional markets. While tariffs and politics spook stocks and bonds, crypto is carving its path. Saylor’s strategy is a big piece of that; his faith in Bitcoin is contagious. I reckon we could see US$250,000 if this momentum holds, similar to what Crypto Twitter’s Cobie predicted. The hard part was getting past US$100,000, and now it’s like the sky’s the limit.
Pulling it all together
So, where does this leave us? Global risk sentiment is downbeat, and it’s easy to see why. The US-EU trade spat is a slow-burning fuse, and Japan’s political hiccup isn’t helping. Markets are reacting in fits and starts; tech stocks are holding up, while bonds and gold serve as safe havens, and the dollar is wobbling. Then there’s Bitcoin, charging ahead like it doesn’t care about any of it.
If the tariff threats turn into a full-blown trade war, we could see more volatility, stocks might stumble, and safe assets could shine. But crypto’s surge suggests some investors are looking beyond that chaos, betting on a future where digital assets outshine the old guard. It’s a bold move, and I’m intrigued by how it’s playing out. Strategy’s Bitcoin grab feels like a vote of confidence, and it might just pay off big.
What do you think? Are you leaning toward the safety of bonds or the wild ride of crypto? Either way, it’s a heck of a time to be watching the markets.
Source: https://e27.co/economic-crosscurrents-tariffs-politics-and-the-crypto-conundrum-20250722/
The post Economic crosscurrents: Tariffs, politics, and the crypto conundrum appeared first on Anndy Lian by Anndy Lian.
