Trump Trade War: Tariffs Tank Markets, Bitcoin Dumps, Altcoins Poop the Bed

In an executive order signed Saturday, Trump cited the surge of illicit opioids and other drugs as justification for slapping 25% tariffs on nearly all imports from Mexico and Canada, while Chinese goods face a 10% tariff. The move, effective Tuesday, is already sending shockwaves through financial markets—with crypto markets, open through the weekend, taking the first hit.

Bitcoin (BTC) fell below the $100,000 psychological threshold on Feb. 2, marking the first time it has dipped below this level since Jan. 27, according to Brave Bew Coin data. The decline follows growing inflation concerns in the wake of Trump’s tariffs, which are expected to push up consumer prices.

Some analysts believe Bitcoin is setting the mother of all bear traps, testing $95,000 as a key support level.

“The $95,000 range remains a critical support area,” said Jason Jones, analyst at BNC Research. “The intersection of Fed rate cuts, Trump’s power plays, and market sentiment will be the catalysts to watch.”

Despite the pullback, Bitcoin still secured a record monthly close above $102,000 in January, marking its first-ever close above the six-figure mark.

Bitcoin dumped to $97,400 days after a record monthly close, Source: BNC Bitcoin Liquid Index

The White House has made it clear: these tariffs aren’t temporary. A senior official told The Wall Street Journal that there will be no exemptions, and the levies will remain in place until Trump is satisfied that Mexico and Canada have stopped the flow of fentanyl into the U.S.

Trump took to Truth Social on Sunday morning, doubling down on his stance:

“THIS WILL BE THE GOLDEN AGE OF AMERICA! WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” he wrote in all caps. “WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”

However, that price is likely to be felt by American consumers—especially as the tariffs increase costs for businesses relying on imported goods. Even Trump’s allies privately hope he will soften his stance once he’s demonstrated his willingness to act decisively.

Canadian Prime Minister Justin Trudeau, who has been trying unsuccessfully to reach Trump since his inauguration, expressed frustration at the move.

“No one—on either side of the border—wants to see American tariffs on Canadian goods,” Trudeau wrote on X, adding that Canada will respond with forceful countermeasures.

Mexico is also expected to retaliate, further escalating trade tensions.

While some economists believe these tariffs could pressure China, Mexico, and Canada into new trade negotiations, others warn that a prolonged trade war could inflame inflation and drag down U.S. economic growth.

Despite the short-term volatility, Bitcoin’s long-term outlook remains bullish, with spot Bitcoin ETFs surpassing $125 billion in assets just a year after their debut. Analysts predict BTC could reach $160,000 to $180,000 in 2025, especially if the Federal Reserve moves toward interest rate cuts amid economic slowdown signals.

The next key event to watch? The U.S. labor market report on Feb. 7. A weaker-than-expected jobs report could increase the odds of a Fed rate cut, which would provide a tailwind for Bitcoin and risk assets.

For now, though, markets are bracing for volatility—both in crypto and beyond—as Trump’s tariffs bring back the uncertainty of trade wars.

With markets closed over the weekend, crypto felt the full force of the poor sentiment. While Bitcoin dropped to $97,400, alt coins pooped the bed, with many falling up to 10% or more as can be seen on the CMC heat map which is a sea of red.

A sea of red shows the crypto bloodbath in dramatic effect, Source: Coinmarketcap

Speaking to reporters, Trump made it clear that his trade offensive won’t stop there, warning that he “absolutely” intends to impose tariffs on goods from the European Union. He accused the EU of treating the U.S. unfairly, adding fuel to fears of a broader trade war.

Economists are sounding alarms over the potential consequences, warning that the escalating trade dispute could tip Canada and Mexico into recession and create ripples across the global economy.

George Saravelos, Deutsche Bank’s top currency strategist, called Trump’s tariff move “the largest shock to global trade policy since the collapse of the Bretton Woods system” half a century ago.

“We see immediate recessionary consequences for some of the economies involved and a broad-based negative impact on the world economy,” Saravelos cautioned.

Paul Ashworth, chief North America economist at Capital Economics, issued an even starker warning:

“This is just the first strike in what could become a very destructive global trade war,” he said. “Imports from the European Union will be targeted within the next month or two, and a universal tariff is set to take effect in April. Given that exports to the U.S. account for around 20% of Canadian and Mexican GDP, today’s tariffs could drive both economies into recession later this year.”

With more tariffs looming, markets remain on edge, bracing for further volatility as the global trade landscape shifts dramatically.