Trade Conflicts, Inflation, and Bitcoin: How New Tariffs (Unintentionally) Promote Bitcoin
- Jonathan Buck
- 9 minutes ago
- 8 min read
Escalation in the Global Trade Conflict: New Tariffs Between the U.S., China, and the EU
Current developments: In recent weeks, the global trade conflict has dramatically intensified. The United States has launched a sweeping package of tariffs against numerous trading partners. For example, goods from the European Union are now subject to a 20% import duty in the U.S. China is also facing heavy charges: in addition to already existing surcharges of 20%, Washington has announced a further 34% import tariff on Chinese goods—bringing the total surcharge on Chinese products to an effective 54%. In response, China has announced retaliatory tariffs of 34% on all U.S. goods, effective April 10. These new tariffs do not only affect the main players, the U.S. and China: even close U.S. allies are included (such as Israel, with a 17% tariff), and countries like Vietnam are facing tariff rates of up to 46%.
This tit-for-tat of punitive tariffs marks a new stage in the trade dispute. The government in Beijing called the U.S. measures unjustified and filed a complaint with the WTO. In Europe, reactions are alarmed: EU Trade Commissioner Maroš Šefčovič criticized the U.S. tariffs as “harmful and unjustified.” The EU is already deliberating countermeasures to present a united response to the American move. Sentiment in financial markets reflects the fear of escalation – stock prices fell globally, and economists are warning of the consequences. Even the Chairman of the U.S. Federal Reserve, Jerome Powell, expects “higher inflation and slower growth” as a result of the new trade barriers. The threat of inflation and recession triggered by this tariff conflict has become a dominant topic in current economic policy.
More Expensive Imports: How Tariffs Fuel Inflation and Weaken Currencies
Tariffs essentially act as taxes on imported goods – and the bill is usually paid by consumers and importing companies within the country. When foreign goods are artificially made more expensive, their prices rise in the domestic market. Imports become more costly for both businesses and consumers, inflation rises, and both production and consumption become more expensive. With the newly imposed import duties, the U.S. government is deliberately driving up the price of foreign goods in the American market. The intended goal may be to protect domestic producers, but in everyday life, this means that everyday goods – from cars to electronics – become noticeably more expensive for consumers. Consumer prices rise – a development that has been observed before in the wake of protectionist tariffs.
Experience shows that such trade barriers have an inflationary effect. Official bodies have issued corresponding warnings: the International Monetary Fund (IMF), for instance, sees tariffs as a significant risk to price stability. Likewise, the European Central Bank has warned that protectionist measures can raise the import price index and thereby fuel overall inflation. FED Chair Jerome Powell put it plainly: in light of the new U.S. tariffs, he expects a tangible increase in inflation.
Currency Impacts: Rising Import Prices and Inflation Influence Exchange Rates
Higher import prices and inflation can also affect exchange rates. In principle, the following applies: a country with higher inflation – assuming all other factors remain constant – will often experience a depreciation of its currency over time, since the purchasing power of its money declines. However, in the short term, other factors also come into play.
Interestingly, the last major tariff round in 2018/2019 initially led to an appreciation of the U.S. dollar against many other currencies: during that period, the trade-weighted U.S. Dollar Index (DXY) rose by as much as 10%. Reasons for this included capital flight into the dollar as a perceived safe haven, as well as the Federal Reserve's interest rate hikes in 2018. At the same time, the Chinese currency came under pressure – the renminbi (yuan) depreciated by about 10% in 2018, crossing the symbolic threshold of 7 yuan per U.S. dollar, its weakest level in 11 years. China deliberately let the yuan fall to keep its exports competitive despite the tariffs. The euro also lost up to 10% in the same period, as Europe suffered from the broader global uncertainty.
In the long term, however, economists agree that currencies mainly reflect a country’s inflation trend. Short-term capital flows and interest rate differentials may lead to temporary over- or undervaluations, but over several years, the foreign exchange market tends to balance out purchasing power differences. One example: Switzerland has consistently had lower inflation than the U.S. or the eurozone in recent decades. Accordingly, the Swiss franc (CHF) has tended to appreciate against both the dollar and the euro. An analysis shows that the nominal appreciation of the franc since 1990 can be explained almost entirely by Switzerland's lower inflation.
In other words: had the exchange rate not moved, Swiss products would have become significantly cheaper than foreign goods over time – a competitive advantage that has been offset by the rising franc. For the U.S. dollar, the reverse is true: higher U.S. inflation weakens the dollar over the long term relative to more stable currencies. Indeed, since the end of the gold standard in 1971, the dollar has lost around 80% (!) of its value against the franc – a reflection of the differing levels of monetary stability.
Victims of the Trade War: Consumers and Savers
The current tariff measures once again confirm what economic experts have long emphasized: in the long run, trade wars produce only losers. Governments may hope to protect domestic industries, but in the end, it is primarily consumers who pay the price. When imported goods become more expensive due to tariffs, households effectively bear the burden through higher prices. Inflation eats away at people’s purchasing power – their wallets are hit as if by an invisible tax. Consumers can afford less with their income, which amounts to a creeping form of expropriation. Ursula von der Leyen, President of the European Commission, recently warned that the new U.S. tariffs would “also harm consumers around the world,” and that these effects would be felt immediately.
And it’s not just direct consumers of imported goods who are affected. Inflation has far-reaching effects: as prices rise across a wide range of goods, savings also lose value. Savers holding their money in euros, dollars, or yuan see its purchasing power eroded by these politically induced price shocks. Even when wages rise with a delay, they often fail to keep up with inflation – leaving less in real terms. Confidence in the currency can be shaken, especially if inflation expectations begin to rise.
Central banks face a dilemma: on the one hand, they must cushion the economic slowdown caused by the trade dispute; on the other, they must combat the inflationary pressure created by the very same tariffs.
In short: the main victims of this policy are consumers and savers, who are deprived of real purchasing power. Domestic producers may benefit in the short term if foreign alternatives become more expensive. But they, too, face rising costs for intermediate goods and declining demand as consumers adjust their behavior. In the end, a trade war is a destroyer of prosperity for all sides – it gnaws at the very foundation of the money we use every day.
Bitcoin in Focus: A Potential Beneficiary of the Trade Conflict
Against this backdrop, one potential “beneficiary” is moving into focus: Bitcoin. The decentralized cryptocurrency was originally conceived as an alternative to the state-controlled monetary system – with the explicit promise of being resistant to inflation. In fact, Bitcoin’s supply is algorithmically limited: a maximum of 21 million bitcoins can ever be created. In a world where political conflicts such as trade wars devalue traditional money, this concept becomes increasingly appealing.Bitcoin cannot be “printed” by governments to cover budget deficits or fund trade wars. This monetary neutrality makes it a kind of digital gold.
Analysts argue that the current developments serve as advertising for Bitcoin. If the Federal Reserve, for example, is forced to inject liquidity or maintain low interest rates in response to the consequences of tariffs, awareness of the weaknesses in our debt-based fiat currency system grows.Confidence in the U.S. dollar as a stable store of value declines when its purchasing power is diminished by trade conflicts. Bitcoin, by contrast, is capped at 21 million units and symbolises both scarcity and monetary neutrality. Especially in an environment where traditional currencies are being undermined by inflation, Bitcoin is coming into sharper focus – not just as a speculative asset, but as a potential store of value in uncertain times.
Markets also seem to be gradually acknowledging this role. Amid recent market turbulence and a decline in the Nasdaq Index, Bitcoin has shown remarkable resilience.
At the same time, statements by heavyweights such as Larry Fink, CEO of BlackRock, are fuelling the debate. He sees Bitcoin as having the potential to replace the U.S. dollar as a reserve currency – particularly in light of the soaring U.S. national debt. A provocative thesis, but one that is gaining traction.
All of this suggests that Bitcoin is increasingly perceived as a hedge against market volatility and currency devaluation. The idea of “digital gold” is no longer a fringe notion – it is becoming a serious reality.
This trend can already be observed in countries with runaway inflation: in Argentina, for example, where inflation has surpassed 100%, many citizens are fleeing the peso and turning to cryptocurrencies to protect their savings. Around the world, institutional investors are increasingly searching for alternative assets in response to rising inflation, seeking to shield themselves from monetary debasement and government interference.Bitcoin is increasingly regarded as “digital gold”: an asset that is independent of central bank policy and whose value cannot be diluted by political decisions.
Macroeconomic Lessons and a Through-Line to Cryptocurrency
The latest tariff decisions in the global trade conflict have highlighted just how closely politics, monetary value, and currencies are intertwined. Politically motivated trade barriers lead to higher prices and place pressure on national currencies – in the long term, exchange rates mainly reflect inflation differentials between countries.
In the end, it is always the general population that pays the price for these conflicts – whether directly at the checkout counter or indirectly through the declining purchasing power of their savings.
In this context, Bitcoin presents itself as a compelling counter-model. The trade conflict between major powers acts as a kind of advertisement for the cryptocurrency because it exposes the structural weaknesses of state-issued money.
While the monetary policies of the dollar, euro and other fiat currencies are influenced by political decisions, budget deficits or central bank interventions, Bitcoin operates with fixed rules from the outset. The total supply is limited to 21 million coins, and the issuance plan is transparent: each week and month, a mathematically precise number of new coins is created through mining (currently 3.125 BTC every 10 minutes) – regardless of election cycles, central bank decisions, or geopolitical tensions.
The current situation invites macroeconomic reflection: currencies are only as stable as the trust placed in them. And when that trust is eroded by trade wars, political arbitrariness, or unchecked money printing, the desire for scarce, rule-based alternatives grows.
Every new tariff, every additional percentage point of inflation is a quiet reminder that money should be more than a political instrument – it should be a reliable store of value. Bitcoin embodies exactly that idea: monetary clarity, scarcity, and independence in an increasingly uncertain world.
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