Liberation Day: Tariffs, Trade Wars, and the Case for Bitcoin

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Introduction

On Friday, April 4th, a major shift in U.S. trade policy was announced: sweeping new tariffs, introduced under the justification of a national emergency stemming from a “large and persistent trade deficit.” The announcement marks a significant pivot in U.S. economic strategy and could represent a turning point in the global trade system that has persisted for over five decades, one anchored by U.S. equities, debt, and the dollar.

At first glance, the new tariff regime appears to fulfill a longstanding political promise to bring jobs back to the U.S., revive domestic manufacturing, and bolster GDP growth. But the underlying motives and ripple effects are far more complex, and potentially transformative.

In this post, we’ll walk through the recent tariff announcements, the historical context that led us here, and how this moment could be a tailwind for Bitcoin’s long-term thesis.

Table of Contents

1. Tariff Fact Sheet

2. How We Got Here

3. Why It Matters for Bitcoin

1. Tariff Fact Sheet

The U.S. announced a new tariff structure designed to incentivize domestic production and reduce reliance on foreign imports. At the core: a flat 10% tariff on imports from all countries, with potential increases up to 50% for nations with significant trade surpluses against the U.S. Conversely, countries that cooperate with U.S. goals of reducing trade deficits will most likely see reductions. This was reinforced through Trump's most recent 90-day tariff delay for countries seeking to negotiate, while spiking tariffs even higher against China.

The rationale is threefold:

• Reviving Domestic Manufacturing: U.S. manufacturing has declined from 28.4% of global output in 2001 to just 17.4% in 2023. Projections suggest it could fall to 11% by 2030 without intervention

• National Security & Supply Chain Resilience: COVID-19 revealed just how exposed the U.S. is to foreign supply chains. Tariffs are being used as a tool to localize production of essential goods and mitigate vulnerability

• Isolating Foreign Trade Adversaries: In a newly designed trade system, the U.S. seeks to balance trade with its partners, while reclaiming an upper hand against its enemies.

While both economically and politically controversial, the goal appears to be economic self-preservation in response to structural imbalances, particularly in trade and debt.

2. How We Got Here

   
   

The U.S. is the world’s largest consumer and, for decades, has outsourced production in exchange for cheaper goods. This created persistent trade deficits, while other nations accumulated dollar reserves. Since the dollar is the global reserve currency, international trade largely relies on it, reinforcing U.S. influence, but also dependencies.

Here’s how the system worked:

1. The U.S. runs a trade deficit, buying goods from abroad

2. The countries selling those goods earn dollars

3. Instead of converting those dollars (which could strengthen their currencies and hurt exports), many nations invest them back into U.S. assets, primarily U.S. Treasuries.

This arrangement allowed the U.S. to finance its debt at low interest rates, but it depended on continuous demand for the dollar and faith in U.S. fiscal discipline.

That faith is now being tested, creating significant uncertainty in public markets. And to make matters worse, ~$9 trillion in debt, or ~25% of total federal debt, is maturing this year; if refinanced at current interest rate levels, would be extremely costly to U.S. taxpayers.

Figure A. Total Federal Debt

Federal debt has surpassed $36 trillion at increased velocity.

Figure B. Federal Interest Payments

Interest payments alone topped $1 trillion in 2024, comprising nearly half the annual deficit.

This model, globalization funded by debt, benefited higher income asset holders (the top 10% of Americans, who own 88% of U.S. equities), but left much of the population behind. The bottom 50%? Many are more burdened by debt than buoyed by rising asset values.

As Scott Bessent, acting Treasury Secretary, noted in a recent interview: 2024 saw record-high numbers of both European vacations and food bank usage in the U.S., a stark symbol of the growing wealth gap.

Figure C. Treasury Secretary Scott Bessent

Interview to discuss tariffs, trade wars, and the wealth gap in the U.S.

3. Why It Matters for Bitcoin

While tariffs aim to realign trade and address imbalances, they could trigger a cascade of secondary effects, several of which create a bullish backdrop for Bitcoin.

1. Reduced Global Demand for Dollars

If global trade slows or becomes more regionalized, there may be less need to hold dollars, buy Treasuries, or invest in U.S. equities from abroad. Countries may look for alternative stores of value, Bitcoin is one such option: decentralized, liquid, and sovereign-neutral.

2. Monetary Easing in Response to Slower Growth

Tariffs may reduce economic growth in the short and medium term, leading to calls for fiscal stimulus and looser monetary policy both domestically and abroad. This could accelerate currency debasement as governments inject liquidity into their economies. Bitcoin, with its fixed supply, stands in stark contrast as a hedge against currency dilution. And as the world has become increasingly digital, we expect Bitcoin to increasingly benefit.

3. Heightened Geopolitical Risk

Trade wars create uncertainty, and in times of global tension, capital often seeks neutral havens. As trust in fiat systems is tested, Bitcoin offers an alternative that isn’t tied to any government or political regime.

If you would like to discuss how a shift in trade policy may impact Bitcoin, feel free to schedule time using the link, here. Thanks for reading!

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Boomer Saraga | Crypto Investment Manager 

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