On February 1, 2025, U.S. President Donald Trump said America would place 25% tariffs on items from Canada and Mexico. Back then, Bitcoin was worth over $100,000. But after a few weeks and more tariff news, its price crashed to $74,500. As of writing, Bitcoin has bounced back to $84,000.

You might think: taxes on cars or clothes shouldn’t affect crypto. It’s digital money, free from government control. But the world’s all connected, and crypto gets caught in the chaos.

Read on to find out how these tariffs shake up crypto prices.

Understanding Tariffs

Imagine bringing your favorite beer to a restaurant, where they charge you a ₱500 corkage fee because it’s not from their store. That charge is like a tariff, a tax a country puts on things brought in from other places.

Countries use tariffs to make domestic products cheaper, generate revenue, or retaliate against perceived unfair trade practices. The downside? These taxes increase consumer prices.

In the U.S., President Trump is implementing tariffs to boost revenue and encourage domestic manufacturing. By taxing imports, he says is, “Buy American, or pay more!”

The Philippines faces challenges, too. The U.S.’s 17% tax on our exports, including computer chips and office supplies, affects our trade relationships. These higher prices may push American companies toward countries with lower tariffs.

Why Tariffs Affect Crypto Prices

Though cryptocurrencies are supposedly decentralised, they remain connected to global economic forces. Tariff wars affect crypto prices in multiple ways. They cause market swings and change investors’ behaviour.

1. Uncertainty and Risk Aversion

Consider this: you start dating a boy from Tinder. After three months, you’re ready to make things official. But red flags appear, such as gambling habits and suspicious friendships with other women. Not wanting to risk heartbreak, you decide to exit the relationship.

When tariff announcements come out, investors become nervous. They sell high-risk assets like crypto and stocks, and prefer assets like cash or gold.

Whether Filipino or American, feelings of uncertainty lead you to safer assets. This feeling also becomes truer if you have upcoming payments like loans, schooling, and significant life events.

2. Inflation and Recession

U.S. tariffs make imported items more expensive. Basic goods like rice and vegetables suddenly cost Americans much more.

How does this affect the Philippines?

Because our economies are connected, prices will rise here, too. Some items in the Philippines are imported from the U.S., and they may contain materials from outside the U.S.

We will also feel the impact if American companies reduce their orders from Filipino suppliers. Our manufacturers will struggle and may be forced to cut workers.

The steady rise in prices is called inflation. When goods become too expensive, people buy less, causing businesses to earn less. The economy can then slide into a recession, when jobs and income become scarce.

Finally, when your money only covers food and bills, you won’t have extra cash for crypto investments. You might even need to sell your crypto today to prepare for tough economic times.

3. Correlation with Global Equities

Cryptocurrencies move in lockstep with equities. What used to be a standalone industry is now highly correlated with other markets. Institutional investors, now major crypto players through ETFs (exchange-traded funds), de-risk across portfolios when tariffs hit.

Crypto also experiences price shifts more quickly as a 24/7 market. Once headlines hit social media, panic ensues, and prices react accordingly.

Final Thoughts

Tariffs, particularly when they escalate into trade wars, create uncertainty and drive down crypto prices. We’re in uncharted territory, as U.S. tariffs haven’t been this high since before World War II, over a hundred years ago.

We must navigate this period carefully, considering how these dips in crypto prices affect our personal investment strategies.