Global markets face a turbulent week after U.S. President Donald Trump’s Friday tariff announcement sent U.S. stock futures plummeting and triggered massive crypto liquidations, signaling deepening concerns about prolonged higher interest rates.
Dow futures dropped 1.2% late Sunday, while S&P 500 and Nasdaq futures tumbled 1.9% and 2.7% respectively following Trump’s announcement of 25% tariffs on Mexican and Canadian goods and 10% levies on Chinese imports. Those are set to take effect on Monday at 12:01 a.m. EST.
Bitcoin and Ethereum have sunk 5% and 10% respectively while Dogecoin and XRP are down 19% apiece.
Crypto markets, trading 24/7, have become early indicators of broader market sentiment. The decline across futures markets and crypto suggest traders expect significant turbulence when U.S. markets open on Monday.
The upheaval precedes a crucial earnings week, with over 120 S&P 500 companies reporting results. Market observers warn that sustained trade tensions could significantly impact corporate profits and growth expectations for the year ahead.
“There was always going to be extra volatility early on, Trump says he is trying to stop the flow of fentanyl coming across from Mexico and Canada,” Ryan McMillin, chief investment officer at crypto fund manager Merkle Tree Capital, told Decrypt.
“In the short term, we’ve bottomed. Market makers have used this tariff news cycle to sweep the leveraged longs and there is now very little liquidity worthy of pushing price lower,” McMillin said.
The announcement sparked over $2.1 billion in crypto liquidations over the past 24 hours, according to CoinGlass data. Bitcoin fell to $96,300, its lowest in three weeks, while Ethereum plunged roughly to $2,800, erasing gains made since early November, data from CoinGecko shows.
The recent tariffs are likely to lead to increased inflation, which could dampen investor sentiment in crypto, according to Nick Forster, founder of DeFi derivatives protocol, Derive.
“We’re already seeing signs of heightened market volatility, as BTC’s 30-day implied volatility has risen by 4% to 54% in the wake of these tariffs and the broader economic uncertainty,” Forster told Decrypt. “We expect this volatility to persist as more negative catalysts likely unfold in the coming weeks.”
The market reaction reflects concerns that tariffs could force the Federal Reserve to maintain higher rates throughout 2025. Inflationary pressure from import costs and supply chain disruptions reduces the likelihood of rate cuts this year.
“The fact is we are just entering a period of unprecedented political support for crypto and there is a huge degree of uncertainty around how the tariff war will play out,” Pav Hundal, lead analyst at Australian crypto exchange Swyftx, told Decrypt.
“We have U.S. non-farm payrolls and unemployment rate data this week and I expect the market to be hyper-sensitive to any surprise to the upside or downside. We will have more clarity very soon on the likelihood of any risk to rate cuts,” he said.
Higher for longer rates could impact borrowing across major markets leading to a risk-off appetite, particularly for crypto. Or so the thinking goes.
“As inflationary pressures rise, the Fed may maintain or even increase interest rates, which historically has led to less favorable conditions for crypto assets. This could result in contraction for the digital asset sector over the next few quarters,” Derive’s Forster added.
Some pain
Trading partners announced swift retaliation. Canada imposed matching 25% tariffs on $155 billion of U.S. goods, while Mexico promised countermeasures and China plans a World Trade Organization lawsuit.
U.S. dollar figures surged in early Asian trading hours, pushing the Canadian dollar to its weakest in nine years. The euro tumbled to its lowest since November 2022, according to IMF data.
“Will there be some pain? Yes, maybe (and maybe not!),” the president said on social media, commenting on reactions to his tariffs.
These tariffs from Trump “have shaken the crypto markets, leading to around $700M+ in long liquidations” as “uncertainty looms” Dominick John, an analyst at Kronos Research, told Decrypt.
U.S. companies with significant international exposure face particular pressure. Technology and consumer discretionary sectors, heavily dependent on global supply chains, show increased vulnerability in pre-market trading.
While caution is warranted, some believe the market reaction is overblown.
“Trump went out of his way to link this round of tariffs to the fentanyl trade, involving Canada, Mexico, and China,” Peter Chung, head of research at Singapore-based algorithmic crypto trading firm Presto, told Decrypt.
Chung suggested that the tariffs come with an implicit exit strategy—if Mexico, Canada, and China strengthen their controls on fentanyl production and trafficking to a level that satisfies Trump, the tariffs could be lifted.
“We will see how it goes. I have a feeling that the trade tension may diffuse sooner than people think,” he said.
Editor’s note: Adds additional comments from Hundal and Chung. Updates total crypto liquidations figure
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