Bitcoin Drops as China Escalates Trade War With 34% Tariff on US

Both Bitcoin and other markets have been affected. The S&P 500 fell from 5,260 points to 5,250 points, while the Dow Jones Industrial Average dropped from 41,100 points to 40,500 points. Chinas actions have raised concerns about the potential escalation of the global trade war.

“The ‘Third World War’ of the trade war has begun,” The Kobeissi Letter commented.

What Will Happen to Bitcoin When The US-China Trade War Escalates？

This cryptocurrency, often praised as a hedge against economic instability, tends to behave like a risky asset during sudden uncertain periods. Historical patterns support this reaction—during the US-China trade war in 2018-2019, Bitcoin experienced significant sell-offs as tariffs escalated, only recovering when the narrative of value preservation took precedence.

A significant portion of the global cryptocurrency hardware supply chain comes from China, where companies like Bitmain dominate the production of ASIC mining machines—important devices for Bitcoin mining.

With the US now facing a 34% tariff on technology imports from China, the cost of importing these mining machines is expected to rise dramatically. Bitcoin miners in the US, already facing high energy costs and competitive pressure on hashrate, may see their profits shrink further.

However, the long-term outlook for Bitcoin may not be as bleak as the initial market reaction. Some analysts suggest that prolonged trade wars and economic friction could enhance Bitcoins appeal as a decentralized asset unaffected by government intervention. If tariffs lead to inflation or weaken fiat currencies like the USD, investors may turn to cryptocurrencies as a safe haven.

“It‘s not gold, and it’s not the yen. Instead, Bitcoin is emerging as a risk-dynamic asset – one that doesn‘t crumble like high-growth stocks but also doesn’t attract the same flight-to-safety flows as traditional safe havens,” Nexo Dispatch Editor Stella Zlatarev told BeInCrypto.

This sentiment aligns with research indicating that instability often causes initial price drops but can pave the way for growth as acceptance increases.