- Global markets initially tanked after Trump’s tariff announcements, with false rumours of a pause followed by threats of additional 50% tariffs on China if they don’t withdraw their 34% retaliatory measures.
- China refuses to back down and threatens to limit rare earth metal exports globally, while EU Commission President von der Leyen indicates openness to negotiations but warns of potential countermeasures.
- Bitcoin’s 26% drawdown from its 2024 all-time high could worsen according to analysts, with some suggesting previous 70-80% correction patterns might repeat, and one Bloomberg analyst even projecting Bitcoin could reach US$10,000.
- Economic concerns are mounting as the Trump administration focuses on lowering interest rates to manage US$6.5 trillion in national debt due in early 2025, while BlackRock CEO Larry Fink warns sticky inflation might prevent rate cuts and sees current market conditions as both a buying opportunity and a risk for further downturn.
Trump’s tariff play has drawn mixed responses globally. While markets tanked for several days, they seem to stabilise for the time being. Some countries have offered to make concessions and appease Trump, while others are fighting back.
First, rumours about a Trump pause on tariffs had led markets to believe all was well; however, these rumours turned out to be false.
Following that, Trump posted that if China didn’t withdraw its 34% retaliatory levies, he would add another 50% on the already imposed tariffs, making it a 104% total tariff.
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China Holds Firm, EU Ready for a “Deal”
Though China doesn’t seem to be thinking of backing down, with reports it will limit its global export of rare earth metals while it readies itself to “fight [tariffs] to the end”.
Meanwhile, Ursula von der Leyen, the President of the EU Commission, said that the bloc is ready to talk to US leadership and come to an agreement. While she said that they would be open to a deal she insisted they would also not hesitate “to respond with countermeasures”.
So, quo vadis crypto?
According to head of research at data analytics firm CryptoQuant, Julio Moreno, the current crash – which already marks a 26% drawdown from the all-time high in 2024 – could get worse.
In previous cycles, Bitcoin had seen corrections of 70-80%, leading analysts to believe BTC could trade at much more of a discount – one Bloomberg analyst even suggested Bitcoin could reach US$10k (AU$16.6k).
Threat of Stagflation Remains High
A recent analysis by Galaxy Capital Management posits that the Trump administration is focusing on lowering interest rates to manage the repayment of the US$6.5 trillion (AU$10.8 trillion) national debt that needs to be paid back in the first half of 2025.
By reducing interest rates, it becomes cheaper for the government to borrow money, which can help manage such a large debt. During this time, the yield on 10-year US Treasury bonds, which influences long-term interest rates, dropped below 4.00% before rising slightly to 4.04%, the analysts wrote.
This scenario is concerning to investors because low growth combined with high inflation – or, in other words, stagflation – could further dampen the economic outlook.
Sticky Inflation Could Lead to Pause in Rate Cuts for 2025, Says BlackRock CEO
As a result, financial markets are paying very close attention to broad economic signals: Galaxy added that jobs look “okay so far”, but economic growth has slowed and inflation remains an issue.
Although inflation initially seemed to ease, it is increasing again, with analysts saying the “renewed trade war could further fuel inflation as its effects spread through the economy”.
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BlackRock CEO Larry Fink, speaking at the Economic Club of New York, said the US Fed is potentially not going to lower interest rates in 2025. He added that he sees some positives in the current situation, with a potential to ‘buy the dip’, while also warning we could see further corrections.
I see it more as a buying opportunity than a selling opportunity, but that doesn’t mean we can’t go down further.
BlackRock CEO Larry Fink
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