Binance Research Report: Aggressive Tariff Policies Drive Cooling Demand, Rising Risk Aversion, and Surging Volatility

By Binance Research

Edited by Cheryl L.

The resurgence of tariffs in 2025, spearheaded by President Trump’s sweeping import duties, has sent shockwaves through global trade and financial markets. Dubbed the most aggressive tariff measures since the Smoot-Hawley Tariff Act of 1930, these policies have reignited trade tensions and triggered significant macroeconomic repercussions. Binance Research has released a comprehensive report analyzing the effects of the 2025 tariff resurgence on global markets, with a particular focus on the crypto industry. Below is a summary of the key findings from this detailed analysis.

Key Developments in the 2025 Tariff Escalation

On April 2, the U.S. announced reciprocal tariffs targeting imports from major economies, marking a dramatic reversal from decades of trade liberalization. A blanket 10% tariff on all imports took effect on April 5, accompanied by country-specific duties, including a 54% tariff on Chinese goods, 20% on European Union imports, and 46% on Vietnamese products. Canada and Mexico, already subjected to 20% tariffs earlier this year, remain exceptions.

Figure 1: The April 2 “Liberation Day” tariffs targeted up to 60 countries, including several of the U.S.’s largest trading partners, from Binance Research

Global retaliation has been swift. China imposed a 34% tariff on U.S. imports on April 4, while Canada enacted a 25% tariff on American goods. The European Union is expected to follow, signaling a multi-front trade war. These measures have pushed U.S. import taxes to an average of 18.8%, a dramatic increase from 2.5% in 2024. Economists warn of heightened inflation, potential stagflation, and recession risks as the trade war escalates.

Figure 2: The resurgence of U.S. tariffs has driven import taxes to their highest levels in nearly a century, from Binance Research

Crypto Markets React: Cooling Demand and Heightened Volatility

The crypto market has experienced significant fallout. Total market capitalization has dropped 25.9%, erasing approximately $1 trillion in value since January. Bitcoin (BTC) has fallen 19.1%, Ethereum (ETH) has plummeted over 40%, and high-beta assets like Memecoins and AI tokens have plunged more than 50%. This selloff highlights the sector’s sensitivity to macroeconomic instability.

Figure 3: Since initial tariff announcements, crypto is down 25.9%, the S&P 500 17.1%, while gold is up 10.3%, breaking successive all-time highs, from Binance Research

Figure 4: Altcoins have taken significantly heavier hits than Bitcoin, as macro fears sparked by tariffs weigh on crypto market sentiment, from Binance Research

Volatility has surged, with BTC experiencing sharp price swings following tariff announcements. Notably, BTC saw a single-day drop of 15% after Trump’s February tariff plans targeting Canada and the EU. Ethereum’s 1-month volatility has climbed to over 100%, underscoring the market’s vulnerability to abrupt policy changes.

Figure 6: In this period, BTC’s 1-month realized volatility rose above 70%, while ETH surged past 100%, reflecting intensified market swings in the month following tariffs, from Binance Research

Investor sentiment has shifted to risk-off behavior, with capital flowing into traditional safe havens like gold, which has reached successive all-time highs. A survey revealed that only 3% of fund managers are allocating to Bitcoin in the current environment, compared to 58% favoring gold.

Figure 5: Just 3% of FMS investors view Bitcoin as their preferred asset class in the event of a trade war, from Binance Research

Macroeconomic Impact and Federal Reserve Outlook

The tariff-driven inflationary pressures have complicated the Federal Reserve’s efforts to manage price growth. Consumer inflation expectations have risen to 5%, while market-based measures like inflation swaps are above 3%. Economists warn of potential stagflation, with U.S. GDP projected to decline nearly 1% and global output losses possibly reaching $1.4 trillion.

Figure 7: The change in macro conditions in 2025 has pushed 1-year expectations toward elevated inflation and reduced growth, from Binance Research

Fed policy is entering a critical juncture, with futures markets increasingly pricing in rate cuts to support economic growth. Fed Chair Jerome Powell acknowledged the tariffs’ outsized impact, emphasizing the need for close monitoring of inflation and growth dynamics. The central bank faces a challenging trade-off between tolerating tariff-induced inflation and maintaining a hawkish stance to curb price pressures.

Figure 8: Markets are increasingly pricing in rate cuts for 2025, now expecting four 25bps cuts — a significant shift from earlier expectations of just one, from Binance Research

Crypto’s Outlook in a Protectionist World

The evolving trade war and macroeconomic uncertainty are reshaping crypto’s correlation with traditional markets. Bitcoin’s correlation with equities has strengthened amid risk-off sentiment, while its relationship with gold has weakened. This alignment underscores crypto’s current positioning as a risk asset rather than a safe haven.

Figure 9: An initial fragmented response gave way to tighter BTC-S&P 500 alignment as the tariff war deepened, contrasting with a steadily declining gold correlation, from Binance Research

Despite short-term volatility, long-term holder supply for BTC remains resilient, suggesting conviction among investors. The asset may still reassert its appeal as a hedge against monetary inflation and fiat debasement, particularly if the Federal Reserve pivots to rate cuts.

Figure 10: Bitcoin’s long-term correlation with traditional assets has remained modest, averaging just 0.32 with S&P 500 and 0.12 with gold since 2020, from Binance Research

Looking ahead, crypto markets face a complex landscape dominated by trade policy risks, stagflationary pressures, and fractured global coordination. Key catalysts include further trade developments, inflation data, global growth indicators, central bank policy shifts, and crypto-specific regulatory changes. Until macro conditions stabilize, the crypto market is likely to remain reactive to global headlines.