Was there an assumption that Trump's tariffs would cause for the economy to go down and drag bitcoin with it?
Not exactly.
1. The tariff war is mostly creating disruption in the world and it causes uncertainty which means people are less willing to invest into something that has higher risk than traditional assets such as gold. This means bitcoin will have trouble rising (that doesn't mean it would drop though).
2. The next effect is going to be inflation in the US as tariffs will increase price of a lot of things (as it already has in the USA). Inflation is generally considered a positive force that can contribute to bitcoin's price rise.
3. But as we know governments battle inflation by increasing interest rates. The rates are already high and they are causing recession, increasing them would worsen the recession. And based on the past we know that during recession bitcoin price drops.
These are generally the 3 main factors that should be considered when we want to analyze what effects the Trump's tariff war has on bitcoin price.
Inflation is rising because of Donald Trump's decision to impose tariffs on some countries. NY Fed's Williams expects a 1% hit to inflation, with growth slowing and of course that means unemployment is going to rise. That will weaken the value of dollar and also the return or interest of fixed income places like bonds or treasury bills are going to take a hit. That is why investors are going to look towards BTC and gold. But still higher inflation might force the Fed to hold rates steady or even hike, which could pressure risk assets like bitcoin short term. But if the central banks actually do decide to cut the interest rates, dollar is not going to be popular between investors anymore and it is going to be bitcoin virtual see a rise in value. Macro's messy, but bitcoin friendly policy and changing investor flows could tilt the scales in Bitcoin's favor.
