Bitcoin Crashes Below $95K as Trump Tariffs Provoke Retaliatory Pledges from Canada, Mexico and China

Investors preferred the US dollar, elevating it to stronger levels while shunning risk assets.

Bitcoin price crashed below $95,000 on Monday morning as President Donald Trump's threat to impose tariffs on Canada, Mexico and China became a reality.

After promising the levies for months, Trump announced last week that tariffs of 25% on Canada and Mexico and an additional 10% import tax on China would begin on Tuesday, prompting pledges of retaliation from the nations.

In response, investors piled into the US dollar, which rose to stronger levels, while risk assets were largely shunned.

Monday saw financial markets forced to contend with the reality after weeks of anticipation of a US-led trade war, with tit-for-tat trade retaliation threatening global trade and businesses.

The dollar has gained throughout Trump's presidency simply by discussing tariffs. The dollar rose around 1% last week, marking its strongest gain since mid-November.

On Friday, automakers and companies linked to China led a drop in US markets.

Bond traders face the difficult choice of focusing on inflation concerns or heightened market risk, with bets starting to show the Fed will be on an extended pause.

The crypto markets are finally learning about 'Trump Speak' and his policies.

While he has embraced the industry, his other policies are negating the boosts to the sector.

With two weeks of Trump in office, the divide between Bitcoin maximalists and the rest of the crypto community has been widened once again.

Bitcoin crashed below the $95,000 level, down over 6% through the weekend from above $105,000 on Saturday.

The tariffs are expected to be inflationary and will keep US interest rates high. They will also have a greater negative impact on foreign economies than the US, making the dollar more attractive as a safe haven.

This is the basis for the positive dollar price action. As demand for expensive US goods decreases, the value of foreign currencies falls.

Traders are on high alert for large stock market movements in sectors that are seen as potential battlegrounds in a trade war.

Fears that the tariffs would increase inflation and hurt bottom lines caused a basket of vulnerable equities tracked by UBS Group AG to fall nearly 4% on Friday.

While Trump claimed last week that he was not concerned about how markets would react to his trade proposals, cryptocurrency investors saw this as a warning.

Treasury yields dropped to their lowest levels since 2025 at the beginning of the year, despite weaker-than-expected inflation data.

However, investors in fixed-income will now face the challenge of weighing the increased market risk against the inflationary effects of tariffs and Trump's immigration light fiscal heavy handed approach to economic policy.

The fixed-income and crypto markets will face further challenges in the days ahead.

Following the recent pause in the Fed's easing cycle, which signaled an extended but hawkish hold, data on inflation and employment will influence expectations.

For now, Trump's policies are clearly pointing to inflationary headwinds.