Binance Research has published a report by Moulik Nagesh, in which the impact of Trump’s tariff-based policy on financial markets in general and on crypto markets is analyzed.
The report examines how the most aggressive tariffs of the last 90 years are impacting the macroeconomy and the cryptocurrency markets.
In the short term, this causes volatility, due to the sentiment that swings in response to developments in the ongoing trade war.
Binance report: the forecasts on crypto markets with the tightening of Trump’s tariff policy
Nagesh writes that if l’inflazione USA were to actually increase, just as growth falters, the response of the Fed will be crucial.
In fact, a potential shift towards a monetary policy easing could also end up fueling a bull rally in cryptocurrencies thanks to new liquidity, otherwise an aggressive and restrictive stance could keep the pressure on risk-on assets.
Beyond that, progress or setbacks in tariff negotiations will influence investor sentiment in both directions.
According to Nagesh, however, if sooner or later the macroeconomic conditions were to stabilize, and new narratives took hold (such as crypto seen as a long-term hedge), a period of growth could be triggered.
Until then, however, it seems likely that the markets will remain confined within a narrow range, and still very reactive to macroeconomic news.
Nagesh advises investors to stay updated on global developments, to diversify, and to be ready to capitalize on any market dislocations that this trade war might create.
The problem of tariffs
The report hypothesizes that the response of the countries affected by Trump’s tariffs will be to impose tariffs in return. At this point, it states that although the real impact of these responses on a global scale remains uncertain, all signs point to the emergence of a multi-front trade war.
It also points out that the latest developments have already brought the US tariffs to levels not seen since the Smoot-Hawley Tariff Act of 1930, because the average US tariff rate has risen to about 18.8%, with some estimates even seeing it at 22%. In 2024, this figure was at 2.5%.
Furthermore, it highlights how for much of recent history, even during the previous trade skirmishes of 2018-2019, US tariffs had averaged between 1% and 2%, with a peak close to 3%. Therefore, the measures introduced by Trump in 2025 represent an unprecedented tariff shock, similar only to the protectionism of the Great Depression.
The problems of the markets
In this context, Nagesh identifies two main problems for the markets:
- the cooling of risk appetite, and therefore of demand;
- the peak of volatility.
In fact, by now the market sentiment has become cautious, leading to an increase in risk aversion.
Furthermore, the market’s sensitivity to Trump’s tariff policy is made evident by the fact that every major announcement has triggered spikes in volatility.
For example, Bitcoin has experienced several violent price swings in recent months, including one of the largest daily drops since the 2020 crash due to the onset of the pandemic.
The total capitalization of the crypto market has decreased by about 25.9% compared to the highs of January, also because the cryptocurrency prices have moved in sync with the stock market.
Furthermore, since the initial announcement of the tariffs, the price of gold has risen by 10.3%.
At this point, it comes to assert that, since crypto markets are increasingly behaving like risk-on assets, a prolonged trade war could continue to weigh on capital flows and hinder the demand for digital assets in the short term.
The macroeconomic problems
Even at the macroeconomic level, the report identifies two main problems:
- the fears of inflation and stagflation,
- and the monetary policy of the Fed.
In fact, the new tariffs are equivalent to a substantial increase in taxes on imported goods, and this adds inflationary pressure in the USA just as the Fed is trying to curb price growth.
Furthermore, according to some economists, a full-scale tariff war with global retaliations could end up costing the world economy up to 1.4 trillion dollars in lost output, and a real U.S. per capita GDP decrease of nearly 1% just in the initial phases.
At this point, it is not surprising if the future sui Fed Funds are already pricing in a higher probability of diversi tagli dei tassi in the coming months.
Fed officials expressed concern, emphasizing that the tariffs are at odds with their original monetary policy, so much so that now the U.S. central bank faces a difficult choice between:
- tolerate tariff-induced inflation while maintaining an aggressive stance on rates,
- or risk exacerbating a potential economic slowdown.
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What is recommended to do?
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According to Nagesh, it would be advisable to diversify, because the evolution of the relationship between cryptocurrencies and traditional assets is becoming increasingly evident.
However, it also suggests rediscovering the safe haven narrative, especially in the event that the Fed is forced to make its monetary policy expansive again.
It states that if global growth continues to weaken, and a clear narrative for cryptocurrencies does not emerge, the investor sentiment could erode further.