Why are Trump's reciprocal tariffs hitting crypto so hard?

On April 2, 2025 – “Liberation Day,” as Donald Trump called it – Bitcoin wasn’t feeling very free. Within hours of his sweeping tariff announcement, the world’s largest cryptocurrency fell from a range of $85,000 to $75,000. Ethereum dropped too, and the rest of the market followed.

So what does taxing Chinese steel or Canadian cars have to do with crypto?

Quite a bit, actually.

Trade wars aren’t just for trucks and soybeans

Trump’s new “reciprocal tariffs” hit key U.S. trading partners: China, Mexico, Canada, and others. The message? If you tax American goods, the U.S. will do the same.

Markets took it as a sign that economic friction is back, and risk appetite disappeared fast. According to CoinShares analyst James Butterfill: 

“In the short term, tariffs would be negative for Bitcoin. Unlike gold, Bitcoin has a growth component, meaning it reacts to economic trends and liquidity cycles.”

Translation: when investors get nervous, they move money out of riskier assets like crypto. Stocks dipped. Bitcoin dipped harder. Safe havens like gold and the U.S. dollar surged.

Omid Malekan, an adjunct professor at Columbia Business School, says the market’s reaction exposed the tension.

 “Gold spiked on the tariff news. Bitcoin tanked. If Bitcoin were really digital gold, you’d expect it to follow the same path.”

But for crypto, the fallout wasn’t just emotional – it was practical, too.

Bitcoin mining just got more expensive

Alexander Blume, CEO of Two Prime Digital Assets, also weighed in on the debate, telling Sherwood News:

“The Bitcoin mining industry depends exclusively on ASIC computer chips from China... Hikes on tariffs for these products will make production costs for miners higher and their businesses less profitable.”

Mining profitability is already razor-thin. If tariffs raise the price of ASIC chips, some miners may pause operations or shut down entirely. That could lower hashrates and rattle investor confidence, at least in the short term.

Less mining = less security = more market jitters.

Weakening the dollar could strengthen crypto

Tariffs might also chip away at something deeper – the U.S. dollar’s global dominance. Zach Pandl, Head of Research at Grayscale, sees the potential shift:

“I think tariffs will weaken the dominant role of the dollar and create space for competitors including bitcoin. Prices have gone down in the short run. But the first few months of the Trump Administration have raised my conviction in the longer term for bitcoin as a global monetary asset.”

Retaliatory tariffs from other countries could lead them to reduce their reliance on dollar-based trade. That opens the door for Bitcoin and other decentralized currencies to gain ground. Marcin Kazmierczak, COO of RedStone, agrees:

"Protectionist policies that potentially weaken dollar hegemony could accelerate interest in decentralized alternatives over the medium-to-long term.”

Today’s chaos could fuel tomorrow’s adoption.

Short-term pain, long-term signal

Crypto doesn’t live in a vacuum. Tariffs can trigger inflation, spook investors, strengthen the dollar, and hurt miners – all of which ripple into the digital asset space.

Not everyone agrees on where it’s headed. Some say crypto’s going to stay down until trade tensions cool off. Others see this as a turning point where Bitcoin proves it belongs in serious conversations about global finance.

Either way, one thing’s clear: crypto is watching the White House more closely than ever.