U.S.-China Trade War Escalates with 104% Tariff, impacts Crypto

Bitcoin and Ethereum Prices React Amid U.S.-China Trade War Escalation

In a dramatic move that is influencing financial markets globally, the White House has formally imposed a gigantic 104% tariff on Chinese imports, effective today, April 9. The bold move is an implementation of an ultimatum by former President Donald Trump, who threatened China to reverse its 34% retaliatory Trump tariffs on US products. With no concession from Beijing, Washington has proceeded, heightening tensions between the world's two biggest economies. This latest move marks a turning point in the U.S.-China trade war, with ripple effects already hitting global markets and the crypto sector. 

Trade War Intensifies Between U.S. and China

The new tariff rate involves a 20% increase initiated in March, a 34% increase last week, and now another 50%—totaling to a cumulative of 104%. This is among the strongest actions ever pursued under Section 301 of the Act aimed at penalizing what the U.S. deems are China's unfair business practices and state subsidies, says a White House official.

Trump further declared that any subsequent business sessions with Beijing would be called off and instead, his government would make efforts to build relationships with other countries amid the ongoing trade war. China retaliated by making a 34% reciprocal tariff on U.S. products, starting April 10, and imposed new export restrictions on rare earth materials such as scandium, yttrium, and terbium—cornerstone materials used in electric cars and technology products.

Crypto Market Responds to Trade War

The world market shock of the tariff war is now overrunning into crypto space. Following the announcement, Bitcoin fell to $74,647 down by about 4.71% in the last 24 hours, it is currently at $76,366. Ethereum price also fell down 10% to $1,396 and currently valued at $1,438. Investors are shunning high-risk assets such as cryptocurrencies as fears of economic slowdown and uncertainty increase. 

In addition to that, China's export restriction on some rare earth metals might increase the cost of crypto mining. These substances are critical in the manufacturing of mining equipment and semiconductors. If the supply becomes tighter and prices increase, mining activities in the U.S. and other places might be challenged by increased costs and reduced profit margins amid the trade war.

Certain analysts contend this may lower the mining hash rate worldwide, while others say that the inflation brought about by increasing import prices may ultimately compel more investors to turn toward crypto as a hedge—particularly Bitcoin, which is frequently regarded as digital gold.

Markets in Turmoil as Tariffs Take Effect

Stock markets have already given indications of discomfort due to this trade war. S&P 500 has declined by 20% since its peak in February, whereas the Dow Jones Industrial Average is down by more than 17%. The Nasdaq became technically a bear market last week. In Asia, China's Hang Seng Tech Index lost 27% of its value over one month alone, and Chinese yuan fell to its lowest position since January.

With the trade war spilling over and none of the momentum easing off, investors across industries—crypto included—had better be preparing for a fresh wave of volatility. The weeks ahead will determine as much since the U.S.-China gear up for the next wave in what increasingly is a colossal global economic conflict.