This upcoming tariff policy, which is about to be implemented, is seen by the Trump administration as a key step in reshaping the U.S. trade landscape. However, as the policy details emerge, there are growing doubts in the market about its strength and impact. In this global contest, both traditional markets and the crypto realm are affected, with April 2 marking a crucial day that will reveal the future direction. This article is based on the work by Luke from Mars Finance, republished by Foresight News.
(Background: JPMorgan: Risks of Trump’s tariff war become clearer, it’s time to “stop selling high” U.S. stocks)
(Additional context: Fed’s Bostic: Only “one rate cut expected” this year, tariff war hinders inflation control, Trump pressures Powell for rate cuts)
Less than a week remains until the highly anticipated “April 2 Tariff Implementation Day.” This day is referred to as “Liberation Day” by the Trump administration, carrying ambitions to reshape the U.S. trade landscape. However, as media rumors begin to circulate, the script for this policy drama seems less aggressive than what the public expected. Meanwhile, the crypto market — an area highly sensitive to macroeconomic shifts — is also stirring under the shadow of the tariff policy.
Moderate Shift on Tariff Implementation Day?
Recent information suggests that the tariff policy on April 2 may not fully live up to the grand vision painted by Secretary of Commerce Wilbur Ross. He had envisioned a “three-layered” tariff system: one based on reciprocal tariffs, supplemented by additional tariffs targeting specific industries and countries. However, recent rumors indicate that the latter two may see concessions. This is akin to a meticulously prepared feast, only for the final dish to be a simple set meal — lacking some seasonings, but the main course remains.
Why this adjustment? The reason is not hard to guess. The Trump team understands that tariffs are a double-edged sword. Since taking office, their trade policies have caused severe turbulence in the global market: U.S. stock market value has evaporated by trillions of dollars, supply chain pressures have driven up prices, and even eggs have become “luxury goods.” If tariffs are pushed to the extreme, the U.S. economy may bear the brunt. Goldman Sachs economists warn that, despite outward calm, this “moderate posture” hides the risk of “negative surprises.” While the market expects a reciprocal tariff rate of around 9%, Goldman Sachs estimates that the actual figure could double to 18%. This gap is enough to make traders hold their breath, waiting for the next move.
Meanwhile, the “Unfair Trade Practices Review Report,” set to be released on April 1, will serve as a key indicator. This report will reveal the U.S.’s stance on investigating its trade partners, directly influencing the rhythm and intensity of future tariffs. If the report accuses certain countries of obvious “unfair practices,” Trump may seize the opportunity to escalate; if the tone is softer, the market may catch a brief respite. In any case, this report will be the teaser for interpreting the “Liberation Day” plot.
Trump’s Calculations — Fairness, Fairness, or TMD Fairness?
To understand the logic behind the tariff implementation, it’s useful to listen to core members of Trump’s team. Recently, Treasury Secretary Steven Mnuchin and Secretary of Commerce Wilbur Ross shared their thoughts on the All-in Podcast. Ross reflected on history, pointing out that between 1880 and 1913, the U.S. relied entirely on tariffs to sustain its finances without needing an income tax. After World War II, the U.S. actively lowered tariffs to support global reconstruction but allowed other countries to maintain high trade barriers, making the U.S. the “most open” and thus disadvantaged. For example, U.S. car exports to a certain country faced a 20% tariff, while their cars entering the U.S. faced only a 5% tariff. This inequality prompted Trump to declare, “Fairness, fairness, or damn fairness!”
Trump’s intention is clear: one is to protect domestic industries through tariffs, attracting manufacturing back; the other is to raise revenue for the treasury to fill the $2 trillion deficit. Ross introduced a “three-pronged” plan: tariff hikes, sovereign wealth fund investments, and an “immigrant green card” project — the latter reportedly selling 1,000 cards per day, with Trump optimistically projecting 1 million buyers. As for the other half of the deficit, he hopes to rely on the “Government Efficiency Department” to cut $1 trillion in wasteful spending. This department aims to eliminate 25% of the “fat” from the $6.5 trillion annual fiscal spending. While this sounds ambitious, the execution will undoubtedly be challenging.
Treasury Secretary Mnuchin, from a macroeconomic perspective, outlined three major pain points for the U.S. economy: high debt, out-of-control inflation, and a declining manufacturing sector. His remedy includes cutting expenditures, reshaping the trade system, and revitalizing the middle class. Unlike Ross’s aggressive stance, Mnuchin emphasizes a “gradual approach” to avoid triggering an economic recession through drastic actions. White House economic advisor Stephen Moore also added in a Bloomberg interview that as the world’s largest consumer market, the U.S. holds a negotiating advantage and has the ability to force opponents to yield. This confidence comes from strength, but whether it can translate into a victory depends on how opponents respond.
Two Possible Paths for Tariff Implementation
There are two potential scenarios for the tariff implementation:
- The opponent compromises, lowering tariffs on U.S. goods, leading to a U.S. victory and a rally in U.S. stocks;
- Both sides retaliate, forcing Trump to escalate, resulting in a short-term loss for both sides, with U.S. stocks under pressure.
In the short term, the latter scenario is more likely, as few are willing to show weakness in the global contest. However, in the long run, the U.S. may gradually reverse the trade imbalance with its consumer market leverage.
Federal Reserve’s Slow Reaction and the U.S. Stock Market’s Unfinished Bottom
The uncertainty of the tariff policy affects not only the trade landscape but also affects capital markets through inflation and monetary policy. Looking back to 2020, inflation caused by the COVID-19 pandemic caught the U.S. Federal Reserve off guard. Initially, the Fed believed inflation was “temporary,” but by the end of 2021, Fed Chairman Jerome Powell had to admit his mistake to Congress and abandon the term “temporary,” leading to the start of a significant interest rate hike cycle. According to Bloomberg data (see chart 1), the U.S. Economic Policy Uncertainty Index spiked above 500 at the start of the pandemic, reaching a historical peak. Although it has since declined, events like the Russia-Ukraine conflict in 2022 and the Trump tariff policy in 2024 have again raised uncertainty, with the index still hovering around 200, far above the average level from 1995 to 2019.
The Federal Reserve’s response to tariff impacts has also been slow. In recent years, tariff-induced supply chain pressures and price increases have significantly raised inflation expectations, yet the Fed has leaned towards dovish statements to soothe the market. However, this soothing only brings short-term rebounds in the stock market, not a trend reversal. The reason is that the market’s biggest uncertainty — the direction and strength of the tariff policy — remains unresolved. From Chart 1, we can see that major events like the “9/11 attacks,” the “global financial crisis,” and the “sovereign debt crisis” were all accompanied by significant adjustments in U.S. stocks, and the current level of uncertainty suggests that the bottom of the U.S. stock market may not have arrived yet. The market may need to wait for tariff policy clarification or more severe macroeconomic shocks to trigger a full-scale reshuffling.
S&P 500’s Recent Performance Further Confirms This Concern
According to Bloomberg and MacroBond data, the S&P 500 has fallen 7.8% from its February peak, and last week it even briefly dropped by 10%. Historical data shows that if the S&P 500 falls by at least 5% in the next five months, the U.S. economy will likely fall into a recession (yellow line in Chart 2). Conversely, if the S&P 500 can recover in the next 4 to 5 months, the economy might avoid a downturn (black line in Chart 2). However, these data represent averages, and if the economy does enter a recession, U.S. stocks could fall by at least 20%. It is important to note that market sentiment can sometimes exaggerate volatility. For example, in 2022, the S&P 500 fell by more than 20%, but a recession did not occur. The “anticipated recession” panic dominated the market’s performance in the second half of that year.
The Current S&P 500 is at a Critical Crossroads
Chart 2 shows that if the economy avoids recession, the stock market should rebound soon; but if recession risks intensify, selling pressure may continue. The uncertainty of the tariff policy undoubtedly exacerbates this uncertainty. If the April 2 policy turns out to be more aggressive than expected, panic sentiment in the market could push U.S. stocks even lower.
Crypto Market in Turmoil
The direction of the tariffs will directly affect the crypto market. Bitcoin recently surged to $88,786, showing signs of a recovery, but industry insiders have frequently sounded alarms. CoinPanel trading expert Krzysztof pointed out that this rebound feels more like a “bull trap”: shrinking trading volume, retail investors staying on the sidelines, and a negative funding rate — even “smart money” is staying put. The market is as fragile as thin ice, ready to crack with the slightest disturbance. Aave’s stablecoin borrowing rate has dropped to 4%, further confirming the spread of risk-off sentiment.
Bitcoin Holders’ Reluctance to Sell
What is even more concerning is the “reluctance to sell” mentality of long-term Bitcoin holders. These “veterans” are waiting for a higher exit price, but unknowingly, they have become the market’s “dead weight.” Krzysztof believes that only when these holders sell and the market is completely washed out will large players be able to re-enter. However, no signs of such a washout have yet emerged, and the sustainability of the rebound remains questionable.
Historical Data Rings Alarm Bells
Historical data sounded an alarm about the current situation. When Trump first launched the tariff war in 2018, the global market experienced severe turbulence. According to Chart 3, since the tariff announcement in March 2018, the S&P 500 has dropped 12%, while Bitcoin fell by as much as 65%, far exceeding the performance of traditional assets. The characteristic of “high risk leads to high reward” is vividly demonstrated in the crypto market: high risk brings high returns but also accompanies more intense downward pressure. In contrast, the Chinese index performed relatively steadily during the same period, with a cumulative decline of less than 20%, showing the differing sensitivities of various markets to tariff shocks.
CoinDesk’s Analysis Heightens Concerns
CoinDesk’s analysis further intensified this concern: Bitcoin has formed a “double top” pattern near $87,000, and if this bearish signal breaks the $86,000 “neckline,” it could dip to $75,000 in the short term. Altcoins are likely to fare even worse. SignalPlus partner Augustine Van predicts that the market’s soft rebound may continue until the end of the month, but the tariff announcement on April 2 will be a turning point. If the policy is moderate, Bitcoin may surge to $90,000, but if it is stronger than expected, tightening liquidity could trigger a collective plunge.
Speculations on the Outcome
How will the tariff policy on April 2 play out? Based on current information, Trump may opt for a “moderate start”: reciprocal tariffs set at 10%-12%, with tariffs on specific industries and countries delayed. This would maintain room for pressure while avoiding a hard economic landing. If the April 1 report supports further escalation, a second wave of attacks may come in mid-year. In the short term, the market may experience volatility due to the gap in expectations. In the long run, if the trade war reshapes the economic landscape, the recovery dividend may benefit the crypto sector.
For crypto investors, the tariff implementation day is not only a policy barometer but also a magnifier of sentiment. Moderate policies may ignite a short-term rebound, while aggressive escalation will test the market’s resilience. Regardless of the outcome, this contest serves as a reminder that the intersection of macro policies and the crypto market is becoming increasingly tight, and in the midst of the storm, only those who grasp the trends can ride the waves.
