"Trade War Escalates: Tariffs as Monetary Tool, Crypto Market Braces for Impact"
1min read The trade war is here, and its impact on global markets, including cryptocurrencies, is becoming increasingly apparent. As the U.S. implements tariffs and other strategic economic measures, the world watches and waits for the consequences. This article will provide an overview of the current situation, the potential implications for the crypto market, and expert insights on the matter.
In recent weeks, the U.S. has taken significant steps to reshape its economic strategy, with tariffs playing a central role. According to Jeff Park, Head of Alpha Strategies at Bitwise, these moves extend beyond traditional trade policy and function as part of a broader monetary approach. Park connects this strategy to the Triffin dilemma, an issue tied to the U.S. dollar's role as the world's reserve currency. The U.S. wants to keep borrowing cheaply while simultaneously weakening the dollar and rebalancing trade deficits. Tariffs are being positioned as an indirect tool to force movement in that direction.
Global trade relies on the dollar, and foreign governments and central banks must hold large reserves of it. This dynamic keeps the dollar structurally overvalued, making U.S. exports less competitive while allowing the government to borrow on favorable terms. Historically, the U.S. has run persistent trade deficits to maintain this system. However, Park notes that the U.S. is now looking for ways to counter the negative effects of an overvalued dollar without giving up its borrowing advantage. Tariffs are being used in this context, not as a conventional protectionist measure but as a tool to influence foreign governments' dollar reserves and U.S. Treasury holdings.
The goal is to encourage trade partners to shift from short-term Treasury holdings to longer-duration debt, which could help stabilize the U.S. debt market while facilitating a controlled depreciation of the dollar. However, this strategy carries risks. Tariffs increase costs, which can contribute to inflation and prompt central banks to adjust policy in ways that could create instability in financial markets, including crypto.
If inflation rises too quickly, the Federal Reserve and other central banks may respond with measures that heighten volatility across risk assets. People assume tariffs are just about trade, but if you step back, they're part of a broader monetary strategy—one that, if executed correctly, could reshape the entire global financial balance.
If the U.S. weakens the dollar while maintaining low borrowing costs, financial conditions could become more favorable for risk 
