Trump’s Tariffs: A 1930s Mistake Repeating Itself?

U.S. President Donald Trump is once again making headlines with his latest proposal to impose heavy tariffs on major trade partners. While his supporters view this as a strong move to protect American industries, economists warn that it could mirror one of the gravest economic mistakes of the 20th century, the Smoot-Hawley Tariff Act of the 1930s.

The consequences of these tariffs won’t just be felt in traditional markets; they could also shake up the cryptocurrency space, particularly Bitcoin, which has already shown signs of volatility in response to economic uncertainty.

Echoes of the Great Depression

Back in 1930, the U.S. government passed the Smoot-Hawley Tariff Act, a policy designed to shield American businesses by imposing hefty taxes on imported goods. However, rather than boosting the economy, it triggered a global trade war. Countries retaliated with their own tariffs, disrupting international trade and worsening the Great Depression.

Fast forward to today, Trump’s plan involves imposing high tariffs on goods from China, the European Union, Japan, and other nations. Some tariffs are as high as 34%, and if fully implemented, the average U.S. tariff rate could exceed 25%—higher than during the 1930s trade war.

The goal? To reduce reliance on foreign manufacturing and give American businesses a competitive edge. The risk? Skyrocketing prices, inflation, and a potential global trade war that could hurt not only traditional industries but also digital assets like Bitcoin.

Market Reactions: Stocks and Crypto Take a Hit

The financial world isn’t taking this news lightly. Investors fear that retaliatory tariffs from other countries will disrupt global supply chains and increase costs for American consumers.

Cryptocurrencies, often seen as a hedge against economic uncertainty, are also reacting. Bitcoin’s price recently plunged to around $91,530, wiping out gains from the past few months. Some analysts believe the worst isn’t over, predicting a potential drop to $75,000 before any recovery.

Despite Bitcoin’s reputation as “digital gold,” its correlation with traditional markets has increased in recent years. That means if global markets experience turbulence due to the tariffs, Bitcoin and other cryptocurrencies could see further declines rather than serving as safe havens.

Is Bitcoin Still a Hedge Against Economic Turmoil?

Bitcoin’s appeal has long been its independence from government-controlled financial systems. Many investors turn to it during times of uncertainty, hoping it will retain value while traditional assets suffer. However, the recent price drop suggests that Bitcoin is no longer immune to economic shifts caused by trade policies and market reactions.

Some experts, like former BitMEX CEO Arthur Hayes, remain optimistic, arguing that after a short-term dip, Bitcoin could rebound as investors seek alternative assets. Others warn that increasing regulations and scrutiny could limit Bitcoin’s ability to serve as a true “safe haven.”

The Road Ahead: Trade Wars and Financial Uncertainty

Trump’s tariff policies are already causing tensions among global trade partners. Countries like South Korea are trying to negotiate exemptions, while the UK and Italy have warned against the dangers of escalating trade conflicts. If these tariffs go into full effect, we could see ripple effects across the global economy, leading to increased inflation, market volatility, and even recession fears.