From Tariffs to Crypto Reserves: What Game is Trump's Second Term Playing?
On the evening of March 3rd (Beijing time), U.S. President Donald Trump confirmed the imposition of tariffs on Canada and Mexico, set to take effect on April 2nd. This move shattered the last-minute hopes of reaching a deal to avoid comprehensive tariffs. In the span of just over a month since Trump took office, the crypto market has seen a 22% drop in value, while the Trump Media & Technology Group (DJT) has plummeted by 34.75%. Even Tesla, backed by Musk's support for Trump, couldn't escape the downturn, with its stock price falling by 32.87%.
Trump's bilateral commitments upon taking office are clear, but the first major action was the imposition of tariffs. On the surface, Trump's tariffs aim to reduce trade deficits and boost employment and the economy. However, historical evidence from Trump's previous trade wars and those before 1930 shows that tariffs are not a "good deal." The U.S. Congressional Budget Office (CBO) reported that the 2018-2019 trade war cost the U.S. 0.3% of its GDP, approximately $40 billion. The Peterson Institute for International Economics found that the 2018 aluminum tariffs alone led to the loss of about 75,000 manufacturing jobs in the U.S. Moreover, American businesses, in an attempt to restock domestically, ended up shifting production to countries like Vietnam and Mexico.
The tariffs have had a significant impact on global risk markets with "American characteristics." Bitcoin, which had just begun to digest the "sweetness" of the crypto strategic reserve announcement, fell by 8% within 48 hours. The U.S. stock market also suffered, with the Nasdaq index dropping by 2.6%. This market reaction underscores the interconnectedness of the crypto and traditional financial markets, both of which are highly sensitive to Trump's policies.
The announcement of the U.S. Crypto Strategic Reserve is a pivotal part of Trump's strategy. This initiative aims to include Bitcoin (BTC) and other cryptocurrencies in the national strategic reserve, marking a shift from "oil hegemony" to "digital asset hegemony". The strategic reserve is seen as a way to stabilize the dollar and provide an alternative anchor asset to U.S. Treasury bonds. However, this move also faces significant challenges, including technical risks related to BTC private key management and potential 51% attacks. Additionally, there are legal concerns as the Federal Reserve opposes government-led accumulation of BTC, emphasizing that "monetary policy should not be tied to crypto assets".
The U.S. Crypto Strategic Reserve has set off a chain reaction globally. Sovereign funds like Norway's and Singapore's GIC have begun evaluating BTC allocation plans, pushing Bitcoin's market cap above $2 trillion. This move is also reshaping the dollar system, with BTC reserves potentially becoming a new anchor asset alongside U.S. Treasury bonds. However, this strategy faces international resistance, with countries like China and the EU criticizing U.S. "crypto unilateralism" and planning to push for global crypto regulatory coordination under the IMF framework.
Looking ahead to 2025-2030, the crypto geopolitical landscape could see three major shifts:
Digital Gold Standard War: The U.S. pushing BTC as a reserve asset, China betting on central bank digital currencies (CBDCs), and the EU exploring ETH compliance paths, forming a tripartite balance.
Crypto Cold War 2.0: If the U.S. successfully establishes a BTC reserve, it could impose "crypto sanctions" on countries like Iran and North Korea, freezing their on-chain assets.
Wall Street and Silicon Valley Convergence: Venture capital firms like a16z are lobbying Congress to push "DeFi protocols into the strategic reserve ecosystem," binding capital and policy deeply.
Trump's second term is marked by a complex interplay of tariffs and crypto strategies. While tariffs aim to assert economic dominance, the crypto strategic reserve represents an attempt to redefine global financial order. Whether these moves will strengthen U.S. global influence or lead to further economic uncertainty remains to be seen. However, one thing is clear: the crypto market, closely tied to U.S. financial policies, will continue to be a key battleground in this unfolding drama.
