How Tariff Policies Affect the Global Economy and the Crypto Market

Nearly a century ago, the Smoot-Hawley Tariff Act of 1930 caused severe damage to the world economy. This tariff policy, under the guise of protecting domestic industries, ultimately led to a catastrophic contraction of global trade, exacerbating the scope and severity of the Great Depression. To this day, the shadow of trade protectionism has yet to dissipate.

In April 2025, the United States announced that it would raise tariffs on Chinese goods to 125%, causing global markets to panic again. The Chinese Ministry of Commerce quickly responded, stating that if the U.S. continued its "tariff number games," China would "ignore" it and reserve the right to further retaliate. Meanwhile, the U.S. government proposed a "90-day tariff suspension" to 75 countries, reducing the general tariff rate to 10%, but excluding China, Mexico, and Canada. This targeted trade strategy not only increases the risk of economic decoupling between China and the U.S. but also poses new challenges to the crypto market — the new battlefield for global capital flows.

Historical Warnings

The lessons brought by the Smoot-Hawley Tariff Act of the 1930s deserve our deep reflection. At that time, countries fell into a vicious cycle of retaliatory tariffs, ultimately leading to the collapse of the international trade system. This is considered one of the most destructive trade policies of the 20th century, ringing alarm bells for contemporary policymakers: trade protectionism has never been a good solution to economic problems.

In 1930, the U.S. Congress passed this bill, raising the average import tariff to a historic high of 59%. Although the intention was to protect domestic industries affected by the Great Depression, it triggered a disastrous chain reaction. Major global trading partners quickly retaliated, leading to a nearly two-thirds shrinkage in international trade from 1929 to 1934, a 70% plunge in U.S. exports, and further deterioration of the global unemployment rate. This policy not only failed to save the U.S. economy but also exacerbated the effects of the Great Depression, exposing the fatal flaws of trade protectionism: in a globalized economy, unilaterally increasing trade barriers is bound to provoke a "boomerang effect." Even more seriously, the bill undermined the foundation of international multilateral trade cooperation, fostering economic nationalism and laying the groundwork for the collapse of the international economic order before World War II.

New Round of Tariff Games

The tariff war of 2025 is different from that of 1930. The United States is attempting to reshape global supply chains through a "selective tariff war"—applying immense pressure on China while temporarily easing relations with most countries. This strategy of "divide and conquer" may seem shrewd, but it carries risks. As the world's second-largest economy, China is no longer the passive trade weakling of the 1930s. In response to the U.S. decision to impose tariffs, China did not immediately retaliate in kind but instead adopted a "no response" approach while accelerating its "de-dollarization" strategy. This strategic composure has made the market realize that the new round of the trade war may not evolve into a comprehensive melee like that of the 1930s, but rather a more prolonged war of attrition.

The reaction of the crypto market

The U.S. government's tariff policy has triggered severe fluctuations in the global financial market, and the crypto market has also suffered a comprehensive impact. Bitcoin has dropped from $83,500 to $74,500, while Ethereum has seen an even larger decline, falling from $1,800 to $1,380. The total market capitalization of other cryptocurrencies has halved by more than 40%. Market liquidity has significantly contracted, with Bitcoin's monthly inflow dropping sharply from a peak of $100 billion to $6 billion, and Ethereum turning into a net outflow of $6 billion. Despite a large-scale "panic selling", as prices drop, the scale of losses is gradually narrowing, indicating that short-term selling pressure may be nearing exhaustion.

From a technical perspective, the $93,000 level has become a key resistance point for Bitcoin to regain upward momentum, while the $65,000-$71,000 range is a core support area that bulls must defend. The current market has entered a critical phase; if it breaks below the support level, it could lead most investors to incur floating losses, triggering more severe market adjustments. Overall, the crypto market is extremely sensitive to changes in global liquidity, and the uncertainty brought about by the recent tariff policies has caused widespread impacts. Whether the market can stabilize will depend on the subsequent policy direction and the situation of capital inflow.

In this international game, the crypto market is both a passive recipient and an active variable. When the international situation is tense and the global currency system is in turmoil, investors may seek a scarce, global, and government or entity-independent digital store of value. Perhaps, as the credibility of the old order is eroded by trade wars, the seeds of a new system begin to quietly sprout.