Last night, Trump announced a new round of retaliatory tariffs, and after the news was released, global markets were in disarray, with S&P 500 index futures falling 1.5% and Nasdaq index futures down 2%. The cryptocurrency market also saw initial gains followed by a decline.
The U.S. has imposed a 10% tax on basic trade partners, treating even trade deficit countries like Singapore and Australia the same. On top of the 10%, additional taxes will be levied based on the proportion of each country's trade surplus with the U.S. This has rendered the formerly effective transit trade domestically ineffective. Countries like Vietnam (+46%), Thailand (+36%), and Indonesia (+32%) have tax rates that are even higher than the domestic rate of 34%.
Studies have shown that consumer spending by Americans is expected to increase by 1.7 to 2.1%. Rising prices in the U.S. are stimulating capital to set up factories in the U.S., which will also raise comparative cost-performance, gradually stimulating the return of manufacturing to produce more goods to stabilize prices.
This indicates that investor expectations for a recession in the U.S. economy are rising, and the Federal Reserve may accelerate the rate-cutting process to support growth, which has also led to a decline in the U.S. dollar index.
Currently, concerns about weak growth seem to outweigh rising inflation. This indicates that government bonds may attract a flow of safe-haven funds.
The significant increase in tariff rates in this round of policy has forced the average tariff rate on U.S. imports to the highest level since the early 20th century. U.S. consumers are facing more expensive imported goods, which may cut spending, while businesses may also seek to delay capital expenditure decisions.
If tariffs cannot be reduced through negotiation in the future, it will have a significant impact on rising inflation in the U.S. The new tariffs will require passing some costs onto consumers. The scale of the tariffs has also raised concerns in the U.S. market about the downside risks to U.S. economic growth.
Tariffs undoubtedly impact U.S. inflation and also put pressure on economic growth. The market is clearly more focused on the latter, with the overnight swap rate market pricing an 80% probability of a rate cut in June, with three rate cuts totaling 75 basis points expected by the end of the year.
Once the Federal Reserve shifts its focus to economic growth and switches to a rate-cutting path, good days for the cryptocurrency market will surely come, with BTC likely to soar and enter a bull run.
