The Impact of Trump's Trade Policy on Global Crypto Market Stability

The Trump administration's trade policies from 2017 to 2021 reshaped global economic dynamics, introducing volatility that rippled through traditional and crypto markets alike. By leveraging tariffs, trade wars, and unpredictable diplomatic shifts, Trump's "America First" agenda amplified geopolitical risk indices, creating a fertile ground for alternative assets like cryptocurrencies to both thrive and falter. This article examines how these policies influenced crypto market stability, with a focus on Bitcoin's evolving role as a hedge against geopolitical uncertainty.

Geopolitical Risk and Crypto Volatility: A Symbiotic Relationship

Trump's trade policies, particularly the U.S.-China tariff battles, directly elevated geopolitical risk (GPR) indices. According to a Council on Foreign Relations analysis, the Trump Risk Index quantified vulnerabilities in trade, immigration, and security, revealing how anticipated policy changes disrupted U.S. allies and global markets. These disruptions were mirrored in financial volatility metrics: the VIX (market fear index) and MOVE Index (bond volatility index) spiked during Trump's public escalations, such as his 2018 threats of 25% tariffs on Chinese imports, as documented in a Simplify Partners analysis.

Cryptocurrencies, inherently speculative and sensitive to macroeconomic shifts, absorbed these shocks. Research, including a 2024 study, indicates that crypto markets exhibit a non-linear relationship with GPR-remaining relatively stable during normal times but surging in volatility during extreme events. For instance, Bitcoin's price swung from $6,000 in early 2019 to nearly $14,000 by late 2020 amid trade war tensions, reflecting its dual identity as both a risk asset and a speculative hedge, as described in an Affidaty analysis.

Bitcoin's Mixed Hedging Effectiveness

While some investors viewed Bitcoin as a refuge during Trump-era uncertainty, its effectiveness as a safe-haven asset remained inconsistent. A 2025 MDPI study found that Bitcoin and gold were negatively correlated under Trump's policies, undermining Bitcoin's ability to directly hedge against geopolitical risks. However, during specific events-such as the 2019 U.S.-China Phase 1 trade deal-Bitcoin surged by 20% in a week, suggesting temporary safe-haven appeal, as noted in a Finance Magnates article.

The trade war's macroeconomic fallout further complicated Bitcoin's role. As traditional markets faltered, capital flowed into cryptocurrencies, but Bitcoin's volatility often outpaced its utility. For example, in April 2025, Trump's announcement of 130% tariffs on China triggered a 15% drop in Bitcoin's price, underscoring its sensitivity to policy-driven uncertainty, according to a Cointelegraph timeline.

Event Studies: Tariffs and Market Reactions

Event studies on Trump's tariff announcements reveal crypto market instability. A 2025 study found that U.S.-China tariff escalations led to negative cumulative abnormal returns for trade-exposed sectors, with spillover effects likely amplifying crypto volatility. For instance, in February 2025, Trump's 10% tariffs on Chinese imports and 25% on Canadian/Mexican goods caused Bitcoin to dip below $93,000-a 12% decline from its prior peak-an effect discussed in an OKX explainer.

Conversely, temporary pauses in tariffs, such as the March 2025 30-day pause with Canada and Mexico, briefly stabilized Bitcoin prices. Yet, the persistence of Chinese tariffs limited recovery, highlighting the asymmetry of crypto market responses to geopolitical events noted in an FRBSF economic letter.

Implications for Investors and the Future

For investors, Trump's trade policies underscored the duality of cryptocurrencies: they are both vulnerable to geopolitical shocks and capable of outperforming traditional assets during uncertainty. However, Bitcoin's mixed hedging effectiveness suggests that it should not be viewed as a standalone safe-haven asset. Instead, it functions best as part of a diversified portfolio, balancing its speculative potential with its occasional risk-off appeal.

Looking ahead, the interplay between geopolitical risk and crypto markets will likely intensify. As global trade dynamics evolve, investors must remain attuned to policy-driven volatility and the nuanced role of cryptocurrencies in hedging strategies.