Cryptocurrency Descends Under $77,000 as US Imposes Stiff 104% Tariffs on Chinese Goods

Summary

• Bitcoin and US Stock Markets React to 104% US Tariffs on China: The announcement of substantial tariffs by the US on Chinese goods triggered volatility in financial markets, causing Bitcoin to drop below $77,000 after a brief rally and leading to US stock indices like the S&P 500 and Nasdaq erasing intraday gains.

• Escalating Trade War Fuels Economic Uncertainty: The US tariff announcement escalates trade tensions with China, who vowed to retaliate. This situation heightens concerns about an economic slowdown, with Goldman Sachs increasing its US recession forecast to 45% due to trade uncertainty and tighter financial conditions.

• Recession Concerns Prompt Anticipation of Fed Rate Cuts and Investment Shifts: JPMorgan predicts the Federal Reserve will begin cutting interest rates in 2025 in response to economic pressures. Meanwhile, analysts at Loomis Sayles point to a significant recession risk and observe investors moving towards European and Latin American markets perceived as more stable than the US amidst trade turmoil.

The value of Bitcoin experienced a significant downturn today, falling beneath the $77,000 mark.

This decline coincided with the formal announcement from United States President Donald Trump regarding a substantial 104% tariff on imports originating from China.

This action represents a notable escalation in trade tensions that have been contributing to instability in worldwide markets since April 2nd.

News of the impending tariff sparked considerable market turbulence across various asset classes considered to be higher risk.

Notably, both the S&P 500 and Nasdaq indices demonstrated significant intraday rallies, climbing approximately 4% upwards.

This upward momentum proved unsustainable, and both indices reversed course, relinquishing the majority of their daily advances.

Bitcoin’s price trajectory mirrored this pattern of volatility.

Following the wider market sentiment, it briefly experienced a surge, momentarily exceeding $80,000.

Nevertheless, this upward movement was short-lived, and the cryptocurrency subsequently declined, dropping below the $77,000 threshold.

Leading up to the official tariff announcement, President Trump had been engaged in discussions with key allies including South Korea and Japan.

These diplomatic efforts had initially instilled a sense of optimism within the markets, providing a brief respite from the prevailing uncertainty.

The White House indicated that close to 70 nations had expressed interest in establishing trade agreements, with President Trump characterizing these negotiations as both “beautiful and efficient.”

Despite the ongoing trade dialogues and expressions of interest from numerous countries, President Trump affirmed that the substantial 104% tariffs targeting Chinese goods would indeed be implemented.

The implementation of these tariffs is scheduled to occur at midnight on April 9th.

In response to President Trump’s earlier indications of potential tariff hikes, China stated on Monday, adopting a defiant stance.

Chinese authorities declared their intention to “fight to the end” and rejected what they termed “US blackmail,” signaling a firm unwillingness to compromise on the trade dispute.

The unfolding economic repercussions of this escalating trade war have reignited anxieties surrounding a potential economic slowdown.

Investment banking giant Goldman Sachs has recently increased its probability forecast for a US recession to 45%.

This revised outlook is attributed to factors such as the tightening of financial conditions and the growing uncertainty stemming from international trade friction.

Adding to the cautious economic outlook, financial institution JPMorgan Chase now anticipates that the US Federal Reserve will initiate a series of interest rate reductions commencing in June of 2025.

JPMorgan projects a rate cut at each policy meeting, along with an additional reduction in January, ultimately bringing the upper limit of the key policy interest rate down to 3%.

Analysts Point to Economic Risks and Shifting Investment Strategies

Further contributing to the prevailing sense of caution, a report from Bloomberg News cited David Rolley, a portfolio manager and co-head of global fixed income at Loomis Sayles.

Mr. Rolley remarked at a recent financial gathering that tariffs represent “the only tax they can hike” in the current environment.

His colleague at Loomis Sayles, Pramila Agrawal, estimated a 60% probability of a US recession. Another Loomis Sayles expert, Andrea Dicenso, a strategist specializing in multi-asset and emerging market debt, observed a trend of investors reallocating their capital towards markets in Europe and Latin America, which she perceives as offering greater stability compared to the US market under current conditions.

Also Read: Chinese court finds BKEX employees guilty of running illegal cryptocurrency exchanges

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