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Trump's tariffs could reshape global trade, impacting crypto adoption and international payment systems. Explore the economic and regulatory implications.
It seems like Trump is thinking about slapping on some tariffs and declaring a national economic emergency. Apparently, this could be done under the International Economic Emergency Powers Act (IEEPA). The goal? To change the global trade balance. This post is all about how Trump's tariffs might shake things up with crypto adoption, the Fed's stance on money, and whether digital currencies can find a home in uncertain times. Plus, we’ll take a look at how international payment systems might be affected.
According to CNN, Trump's tariff plan includes using the IEEPA to impose tariffs that aim to rebalance global trade. These tariffs are made with the US manufacturing sector in mind, which means they could be rolled out pretty quickly without needing to prove national security concerns. Supporters think it could help get American factories back on their feet. But, with all this uncertainty, how will it affect global financial markets and the crypto scene?
“I believe the president has broad authority to impose tariffs for various reasons, with legal bases available.” – Kelly Ann Shaw, Assistant to Trump on International Economic Affairs
Economic uncertainty is bound to rear its ugly head with these tariffs. Trump’s plan involves tariffs that range from 10% to 20% on most imports and up to 60% on Chinese goods. That’s going to create instability and raise costs for companies involved in international trade. It could make it tougher for fintech startups, including those focused on crypto and digital currency solutions, to get by. Companies might have to spend more on tariffs and less on new payment technologies, which could slow down how fast they’re adopted.
Cross-border payment systems are already bogged down with high fees, slow settlements, and a lack of transparency. Tariffs could make that worse by jacking up the costs tied to international transactions. But hey, it could also mean a faster switch to blockchain-based payment systems. These systems could reduce transaction costs by as much as 80% and increase transparency, making them a no-brainer in a tariff-heavy economy.
International payment portals could take a hit from tariffs on imported goods and services, like tech and infrastructure. That could mean higher fees or lower profits for them. And don’t forget about the potential trade wars and retaliatory measures, which could throw a wrench in cross-border transactions.
Wider economic impacts from tariffs, like potential GDP drops and global slowdowns, could also make things trickier for fintech. If the economy slows down and consumer spending dips, fintech companies might find it harder to expand and innovate.
On the flip side, digital currency payment gateways could see a rise in use as businesses and consumers look for more efficient ways to handle international transactions. Tariffs could impact the development of Central Bank Digital Currencies (CBDCs), which are being looked at as a way to make cross-border payments smoother and cheaper. But tariffs might mess with the international standing of the dollar and other currencies, which could slow down CBDC adoption. Stringent privacy and ID standards, influenced by broader economic policies, might also make CBDCs less appealing for those worried about safety and anonymity.
Christopher Waller from the Fed spoke about the inflation risks tied to Trump's tariff ideas. He noted that inflation would likely stay above the Fed’s 2% target by late 2024, but would gradually fall in 2025. He said the chances of tariffs causing persistent inflation were low.
“I want more rate cuts in 2025, but the pace will depend on inflation progress. I do not expect tariffs to have a significant impact on inflation.” – Christopher Waller
In December 2024, the Fed lowered interest rates by 25 basis points, with more cuts likely coming if inflation remains high. A supportive monetary policy in 2025 could boost liquidity and investment, including in crypto. If the Fed is ready to cut rates further, investors may look to crypto for better returns. Typically, rate cuts make investors more willing to take risks, which helps assets like cryptocurrencies.
But let’s not forget Trump's tariffs. They could stir up trade uncertainties, which might affect crypto by changing how confident people feel about traditional financial systems. Trade disruptions could lead more people to Bitcoin and Ethereum. On the other hand, if tariffs create inflation, the Fed might stop cutting rates or even raise them, which would put a damper on the crypto market.
Trump's tariffs might make it harder for traditional international payment systems to operate smoothly, but could also speed up the adoption of more efficient digital currency payment gateways and blockchain solutions. The economic impact of tariffs, including potential GDP drops and global slowdowns, could also hit the fintech sector. A slower economy with less consumer spending and higher costs for businesses could make it tough for fintech to grow.
In short, Trump's tariffs could shake up global trade and impact crypto adoption and international payment systems. The economic and regulatory fallout will be key in determining the future of digital currencies and their place in the financial system. Investors and businesses need to keep an eye on the effects of Trump's tariffs and the Fed's decisions on market volatility.
