How Do Tariffs Affect Cryptocurrency?

Trump’s tariffs are all that most people in the United States have been able to talk about the last few weeks. But do these tariffs affect the cryptocurrency industry at all?

Tariffs are a touchy subject, and they do affect cryptocurrency, just maybe not in the way you may think. Keep reading to learn more.

The 4 Ways Tariffs Affect Cryptocurrency

In general, there is no industry that is unaffected by tariffs, other than perhaps a farmer bringing his local eggs to market, ignoring the fact that his technological devices used to care for his animals may have been acquired abroad. Regardless, almost every industry has been affected by Trump’s tariffs.

Here are the ways the cryptocurrency industry specifically has been affected:

1. Slowing Economic Growth

While the exact effects of tariffs are often debatable, depending on which party you speak to and when, economists can agree that overall, tariffs slow economic growth. This slowdown can affect both the country imposing the tariffs, as well as the one being forced to pay the tariffs.

If you have been following our blog for a long time, you know that economic slowdowns are often bad for cryptocurrency. This is because when purse strings and economics tighten as a whole, people generally have less money to invest in cryptocurrency or put toward new endeavors.

We have already been seeing this to a small extent, as a result of the general recession, though we can’t specifically assign this decline in growth to the tariffs. Additionally, as of the writing of this article, Bitcoin is once again on an upward trajectory.

2. Increasing Inflation Rates

Tariffs, though they can increase the strength of a fiat currency, they can also increase inflation as various products and services become harder to attain. Thus, they are a slippery slope—no matter how you look at it.

In times of inflation, cryptocurrency can both rise and decline in value as individuals look for a way to hedge their portfolios. That being said, if they don’t have the money to invest or trade, then the market can stagnate quite easily.

Based on these observations, we aren’t sure if this is a current effect of the tariffs on cryptocurrency, as it is too soon to gauge any long-term inflation as a result of said tariffs. This is something that could be affecting cryptocurrency, but we will have to evaluate more later.

3. Poor Trade Relations

Perhaps the most detrimental aspect of tariffs on cryptocurrency is the fact that they can sour international relations as a whole. Companies that might have once considered hiring abroad may now choose to hire locally. Industries that used to source abroad will begin looking for alternatives, even in companies that don’t have a physical product to ship, just to show solidarity.

We think that this is one of the most serious effects, considering that so many other countries are so much further advanced in the cryptocurrency industry. Places like Switzerland, Germany, and the Czech Republic have come so far in terms of cryptocurrency innovation that it seems like a bad idea to anger these relations with a trade war.

Like reason two, this is one we won’t see the effects of immediately, though we know it will come into play later.

4. Lower Access to Technology/Parts

There is something that we believe the US government has grossly overlooked, and that is the fact that so many parts for so many devices are created and manufactured overseas. While the US can work to build these factories, they won’t be built overnight, leaving any US tech companies, those involved in crypto included, scrambling to find the parts they need to function.

This is more critical with companies that mine cryptocurrency, as they are the ones that rely on more physical devices to keep their company up and running. Graphics cards, processors, and microchips are slated to become exponentially more expensive—something which is hard to swallow when Bitcoin mining rewards continue to grow smaller.

Like the poor trade relations, we expect the lower access to the parts needed to mine cryptocurrencies to have a huge effect on cryptocurrency prices. That being said, we can’t say if this will have a good or bad effect. On one hand, some miners may leave the market, making it more rewarding to mine; on the other hand, with fewer miners, it could slow the growth/popularity of various cryptocurrencies.

We do want to note here that many cryptocurrency miners are already located outside the United States—something which is good based on the increased cost of electricity (again, thanks to the tariffs) but those that do remain in the US have some decisions to make.

What You Should Do

Honestly, there isn’t much you can do about tariffs as the average citizen. Of course, if you are a lobbyist for a large company, maybe you can use your sway to convince the government to reduce tariffs, but that’s another topic altogether.

As the average citizen and cryptocurrency enthusiast, all we can ask is that you continue to support cryptocurrency in any way that you can. Whether that means investing, telling your friends, or spending your cryptocurrency when your wallet just can take it anymore, we understand.

Eventually, we expect the US will discontinue the tariffs, either because several companies go bankrupt, or Trump is impeached, but either way, we see this as a momentary setback and we assume that cryptocurrency will come out kicking on the other side, especially if Trump gets his way with a Federal Bitcoin reserve.

Overall, the topic of tariffs and their relation to cryptocurrency is quite abstract, but we do think there is an effect, however minimal it may be. No matter what you think about tariffs, they do affect the economy in both positive and negative ways, and cryptocurrency is part of the economy. What exactly will happen, no one knows, but rest assured, we will still be here, supporting the future of crypto, no matter what.

Whatever you do, just stay away from Trump’s memecoin. That we can promise is a bad idea.