Trump’s Trade War Escalates
The market did not receive good news as the attempt to bottom out failed. In the early hours of today, the White House press secretary announced that an additional 104% tariff on China took effect at noon Eastern Time, leading to another plunge in global financial markets.
When Trump’s tariff policy was introduced on April 3, U.S. Treasury Secretary Mnuchin suggested that all countries refrain from retaliatory actions and wait for any negotiations before April 9. The “fake news” drama played out again, hoping for a rebound as Trump might be willing to negotiate trade barriers against several countries and specific products, temporarily reviving global capital markets.
However, after several days of maneuvering, the market did not receive good news. The increase went from 10% at the beginning of the year to 20% in March, then to 34% in early April, and now an additional 50% of “retaliatory escalation,” turning the U.S.-China trade friction into an “economic nuclear war.”
Can the Stock Market Withstand Another Trade War Between the U.S. and China?
Since the Trump administration announced a new round of tariff policies last week, the international capital market has experienced severe turbulence, with the U.S. stock market suffering the most. As of Tuesday’s close, the S&P 500 index fell below 5,000 points for the first time in nearly a year, a cumulative decline of 18.9% from its peak on February 19, just a step away from the 20% drop threshold that defines a “technical bear market.” It is estimated that the S&P 500 component stocks lost a total market value of $5.8 trillion within four trading days, marking the most severe four-day decline since the index was established in the 1950s.
At the same time, U.S. tariff policies triggered a chain reaction in global capital markets. Bloomberg statistics show that since Trump proposed the so-called “reciprocal tariffs” on April 3, the total market value of global stock markets has shrunk by $1 trillion, slightly more than half of the EU’s GDP. U.S. tech giants became the hardest hit, with the combined market value of seven major tech companies, including Apple and Microsoft, evaporating by $1.65 trillion. Apple, heavily reliant on overseas supply chains, saw its stock price plummet nearly 23% in four days, marking the largest weekly decline since the outbreak of the pandemic in 2020.
Previously, many opinion leaders in the crypto space firmly believed that cryptocurrency assets would not be affected by traditional tariffs, as their transactions do not need to go through borders and customs. They argued that as the world enters a new round of mercantilism and trade barriers, the value proposition of cryptocurrencies becomes even more prominent. Strategy founder Michael Saylor tweeted on April 3, “Bitcoin has no tariffs.”
However, the total market value of cryptocurrencies has fallen 35% from its peak of $3.9 trillion in December 2024, down to $2.5 trillion. The “Crypto Fear and Greed Index” shows a reading of 17, indicating an extreme level of fear in the market and reflecting pessimistic market sentiment.
Last night, Bitcoin once again fell below $75,000, while BTC’s market share continued to rise. The altcoin market is in disarray, with Ethereum dropping below $1,400 again.
In the past 12 hours, the crypto market saw a total liquidation of $243 million, including $192 million in long liquidations and $51 million in short liquidations.
The continued decline in Bitcoin prices may force Strategy, which has been on a buying spree, to sell Bitcoin. According to an 8-K form submitted to the SEC by Strategy on April 7, if Bitcoin prices continue to fall, Strategy may be forced to sell its Bitcoin holdings to meet debt obligations, breaking Michael Saylor’s promise of “never selling Bitcoin.”
Since Trump won the election in November 2024, Strategy has purchased 275,965 BTC at an average price of $93,228 ($25.73 billion), and this portion has incurred an unrealized loss of $4.6 billion.
Pessimistic Expectations Intensify: Analysts’ Views on the Current Market
Over the past week, several Wall Street banks, including Goldman Sachs and JPMorgan Chase, have warned that if the trade war continues to escalate, the U.S. and even the global economy may fall into recession this year, further weakening the attractiveness of financial markets.
Meanwhile, the White House team is celebrating victory, with Trump’s chief trade advisor, Peter Navarro, stating on Fox News Monday evening, “We’re really building a bottom right now. It will reverse next, and the companies in the S&P 500 that bring production back to the U.S. will lead the recovery, and that will happen soon. I guarantee you the Dow will hit 50,000, and there will be no recession.”
However, Navarro’s optimistic remarks did not receive agreement from JPMorgan CEO Jamie Dimon, who warned in his annual letter to shareholders on Monday that Trump’s tariffs will raise prices, drag down the global economy, and undermine the U.S.’s global position by damaging its ally networks. Even some of Trump’s allies, including Elon Musk and Bill Ackman, have recently warned that the logic of this tariff policy is severely flawed and is a wrong path.
Crypto analyst Phyrex believes that from the perspective of the Federal Reserve’s actions, unless inflation falls significantly, even “defensive rate cuts” will be difficult to implement quickly. The real dividing line may come when U.S. GDP data is released at the end of April.
From the crypto market’s perspective, BTC’s turnover rate has decreased today. URPD data indicates that even when prices fall below $77,000, investors in the $93,000–$98,000 range have hardly reduced their positions, suggesting that current selling pressure does not come from high-position holders, and there has been no panic selling at the top. The on-chain structure remains relatively healthy; as long as subsequent policies do not repeat frequently, BTC and risk markets may still have room for phased repair.
As U.S. Treasury bonds no longer play a safe-haven role, the yield on the 10-year Treasury bond has risen to nearly 4.3%, higher than the level at the end of March, increasing the costs of mortgages and other types of loans. The yield on the 30-year Treasury bond closed at 4.76%, nearly half a percentage point higher than Monday’s low. The spread between the two-year and ten-year Treasury bond yields has widened to 48 basis points, the steepest level since May 2022.
BitMEX co-founder Arthur Hayes stated, “The Fed has little time left; the situation is getting out of control. Previously, a stock market decline would lead to a drop in the yield of the U.S. 10-year Treasury, benefiting risk assets. Now, the stock market is down while the yield on the U.S. 10-year Treasury rises, which is bad news. The market has finally realized that if dollar export revenues decrease, there can no longer be buying pressure for bonds or stocks; the game is over.”
Pessimistic expectations are still strengthening. Trader Eugene remarked, “The introduction of global trade tariffs marks a change in world order that has not been seen for over 50 years. Free trade has always been a key driver of productivity and economic growth, contributing to the largest long-term bull market in history. The shift from openness to protectionism will have profound effects that will take years to manifest unless Trump completely abandons his tariff plans, which I consider highly unlikely. This will pose significant long-term resistance to global risk assets.
Regarding cryptocurrencies, the recent structural decline in active developers may be the most concerning issue. In the previous cycle, we could observe developer activity and feel reassured, knowing that our industry still benefited from long-term tailwinds. Fast forward 2-3 years, and we have not produced anything particularly interesting or important, and the future outlook is even worse than it was then.
In the previous cycle, we looked forward to the launch of ETFs and a better regulatory environment under supportive government leadership as a glimmer of hope at the end of the tunnel. Now that these have been realized, but (once again) failed to meet expectations, I see no future factors that can help cryptocurrencies escape their inherent “Ouroboros” (self-circling, self-consuming dilemma).
From a broader perspective, the world situation is undergoing a significant transformation not seen in a century. Billionaire hedge fund manager and Bridgewater founder Dalio stated that while the market and economic focus on tariffs is important, we should not overlook deeper global issues. He pointed out that we are in the “classic collapse” phase of monetary, political, and geopolitical orders, a situation that may only occur once in a lifetime but has occurred multiple times throughout history.
Dalio advises not to be distracted by short-term events like tariffs but to focus on the interplay of five major forces (economic, political, geopolitical, natural, technological). Studying historical cycles (such as currency crises) can help predict the future.
“The current changes are part of a historic grand cycle. Tariffs are merely a surface issue; the real driving forces are the structural collapse of monetary, political, and geopolitical orders. Understanding the interplay of these forces and learning from historical experiences will better equip us to face the future.”
This article is collaboratively reproduced from: Deep Tide