Bitcoin Plunges More Than 15% Following Donald Trump's Threat to Impose Tariffs on China, Mexico, and Canada

Bitcoin plunged more than 15% following former U.S. President Donald Trump’s threat to impose new tariffs on China, Mexico, and Canada.

Bitcoin (BTC) plunged more than 15% following former U.S. President Donald Trump’s threat to impose new tariffs on China, Mexico, and Canada. According to Farside Investors, U.S.-based spot Bitcoin ETFs saw over $3.5 billion in outflows since February 3. The market reacted immediately, with Bitcoin falling to around $86,400 by March 5. Here are three possible reasons for Bitcoin's recent struggles:

1) Economic uncertainty drives risk-off sentiment

Trump’s plans to reintroduce tariffs on Canada, Mexico, and China sparked concerns of a potential “Trumpcession.” The tariffs, which will be 25% on Canada and Mexico, and 10% on Chinese imports, come after a period of heightened risk appetite in financial markets. However, the macroeconomic outlook quickly shifted, with Trump’s tariffs and the looming threat of a U.S. default on its debt obligations putting investors in a risk-off mood.

This led to selloffs in risk assets, including Bitcoin. As reported by Binance Research, during Trump’s 2019 trade war with China, Bitcoin surged as Chinese traders used it to bypass capital controls. But this time, Bitcoin is behaving like a traditional risk asset. Its 30-week correlation with the Nasdaq reached 0.91, showing it is now moving in tandem with equities.

JPMorgan (JPM) has since turned “tactically bearish” on U.S. stocks, adding further downside pressure on Bitcoin.

2) 24/7 trading exacerbates market volatility

Unlike stock markets, Bitcoin trades around the clock, making it highly responsive to macroeconomic developments. When Trump’s tariff plans were confirmed over the weekend, crypto traders sold off before stock markets could react. This rapid reaction drove Bitcoin to a three-week low on February 3, wiping out over $1 trillion in crypto market value.

Conversely, when Trump announced the creation of a U.S. crypto strategic reserve on March 3, Bitcoin jumped 9.58%, marking its strongest daily gain since November 2024. This pattern shows how Bitcoin’s 24/7 trading amplifies price swings in response to policy shifts.

3) Global investors turn to other safe havens

Instead of seeking refuge in Bitcoin, investors pivoted to fiat alternatives. While both Bitcoin and the U.S. dollar weakened, the euro and gold strengthened following Trump’s tariff announcement. The Japanese yen also saw a 4.5% rise, signaling that traders preferred traditional safe-haven assets.

If economic fears continue, Bitcoin could struggle to regain its status as a hedge against uncertainty.

Bitcoin’s future trajectory will likely depend on broader financial conditions. At the time of writing, Bitcoin is sitting at $88,460.00.