One of the signature policies of the upcoming Trump’s second administration will be the imposing of tariffs on foreign goods, specifically those coming in from China and Canada. Many different industries have already noticed how they’ll be affected by this policy, and often not in a way that the administration has planned.
In this article, we’ll explore how the tariffs will affect crypto trade. It’s an area that not many have considered when devising this policy, but those in the know claim that it will feel the effects soon enough.
State of the Crypto Market:
Trump’s administration will take over at a time when the crypto markets are experiencing a boom. It’s been a long time coming, and the general public has taken years to accept cryptos as a valuable asset and investment.
It’s also becoming increasingly convenient for an investor to purchase cryptos using crypto trading platforms with leverage. It means that the platforms lend funds to the investor to get their portfolio going and charge interest on it. Cryptos are also now widely used by traditional financial services, such as pension and insurance funds. There’s also a growing market of altcoins, often purchased by small-time investors.
What’s the policy?
Trump’s policy was announced by his team using social media, but it was also largely discussed during the campaign. Trump’s statement said that the administration would introduce 25 percent tariffs on goods from Mexico and Canada. In a separate post, it also announced a 10 percent tariff on goods from China.
Trump’s tariffs will also add to the existing ones set up by his previous administration and by Biden’s administration. Many have claimed that the cost of these tariffs will be passed on to the consumers buying foreign goods.
Inflation:
When tariffs were last introduced, they caused slight inflation as the cost of the tariff was transferred to the users. The US dollar went up by 0.4% following Trump’s tariff declaration, and the currencies of China, Mexico, and Canada were also affected.
With inflation on everyone’s mind, investors will be looking for deflationary assets. Cryptocurrencies are among such assets because their value isn’t directly affected by the decisions made by the FED. Chances are that, therefore, the introduction of tariffs may have an initial consequence of more interest in cryptos.
Economic Uncertainty:
Tariffs often cause economic uncertainty. They are known to disrupt the supply chain, as many of the parts of the supply chain for everyday items depend on a surprising number of goods from foreign countries. For the US, this is especially true for Canadian and Chinese markets.
There are two main ways uncertainty can affect the crypto market. Some of the investors will drop out due to the additional costs they will have to take on. Others, on the other hand, will take on new investments, especially those that are more risky and offer higher rewards.
Equipment and mining costs:
When it comes to mining cryptos, tariffs could have a huge impact. The equipment used for mining is already pretty expensive, as it requires a lot of computing power. The equipment also comes from China, or at least it’s assembled there. At this point, there’s no indication that IT equipment would be exempt from tariffs.
Some crypto miners will leave the field since they won’t be able to buy, keep, and maintain the equipment that they use for mining if it’s 10 percent more expensive. Others, however, will use the coins they mine to cover the new costs, which will lower the value of crypto in circulation.
Crypto Regulations:
Many experts also claim that the changes in tariffs will lead to new crypto regulations. This is especially true in countries that export to the US and will be affected by the tariffs. In order to produce alternative revenue streams, their governments may be inclined to further regulate or tax crypto investments.
These measures are also likely, as they are a part of the already existing push towards more regulations. Now, when there are many more crypto users out there and the public is used to them, governments are looking for ways to bring order and stricter control into the industry. Tariffs will only expedite such efforts.
Conclusion:
Donald Trump plans to introduce tariffs on foreign goods once he takes the Presidential Oath for the second time. The tariffs will be placed on goods coming in from China, Mexico, and Canada. This policy will affect cryptocurrency markets, among other industries.
Many investors will move to crypto investing as a way to have a portfolio that won’t be affected by inflation. Crypto miners will be affected as their equipment will get more expensive. There’s also a chance that there will be more crypto regulations, as it’s a growing trend regardless of the tariffs.
