U.S. Recession Odds Heighten on Tariff Shock Impacting Bitcoin and Markets
Table of Contents
You might want to know
- How likely is a U.S. recession due to new tariffs?
- What could be the impact of these tariffs on Bitcoin and other cryptocurrencies?
Main Topic
With President Donald Trump's recent announcement of new tariffs, the fear of an impending U.S. recession has been exacerbated. Prediction markets such as Polymarket and Kalshi are reflecting increased concerns. Notably, Polymarket's decentralized platform shows recession odds exceeding 50% for the year, with Yes shares climbing rapidly in value. This change represents a significant shift since the "US Recession in 2025" contract became available early this year.
Kalshi, a regulated U.S. prediction market, similarly indicates escalating anxieties among traders, with the expected recession probability in 2025 escalating from 40% to 54%. Because financial markets tend to anticipate future events, we see this worry reflected in declining risk assets, including Bitcoin. As of the latest updates, S&P 500 futures show a notable decline of 3%, indicating rising risk fear on Wall Street. Simultaneously, Bitcoin's value decreased by 1.5%, trading at $83,100.
The newly announced tariffs include a base rate of 10% on all imports, increasing with tariffs on the most offending 60 nations. China faces the most significant tax hikes, seeing a dramatic increase to 54%. These tariffs are set to commence on April 5, followed closely by heightened reciprocal tariffs on April 9.
The Trump administration touts these tariffs as a solution to the longstanding U.S. goods trade deficits. However, in the short term, they are likely to enhance domestic inflation and global instability. If leading economies such as China and the EU retaliate, a broader trade war could ensue. Some economic analysts predict that this unsettling tariff environment might slow down rather than directly incite a recession.
In the latest UBS blog post, it is predicted that tariff threats could lead to an economic slowdown without crossing into recession territory. Their base case forecasts slower economic growth without hindering a potential 2% expansion, aligning with historical trends.
Financial markets initially perceived these tariffs as dovish, possibly leading to transient risk aversion swiftly counterbalanced by anticipated Federal Reserve rate cuts. Researcher Joseph Wang underscores that while tariffs can increase inflation, their effects are often mitigated by exchange rates and remain temporary. Over the long term, they might damage business sentiment and increase unemployment, a result that the Fed seeks to avert.
Current rate expectations are adjusting, factoring in more likelihood of the Federal Reserve reducing borrowing rates by June, thus continuing an easing cycle initially started in September last year. These developments underscore a dynamic interplay of tariff-driven economic metrics and potential monetary policy responses.
Key Insights Table
| Aspect | Description |
|---|---|
| U.S. Recession Odds | Prediction markets signal over a 50% chance due to tariffs. |
| Impact on Bitcoin | Risk aversion affects Bitcoin with a 1.5% drop as markets react. |
Afterwards...
The unfolding economic scenario underscores the necessity for further exploration of mitigation strategies against trade-induced downturns. Economic resilience and diversification are emerging as crucial focus areas, with potential implications for international trade policies and financial market stabilization. Additionally, ongoing monitoring of monetary policies by central banks remains vital in navigating these complex economic waters. With the impacts of trade war threats becoming more pronounced, the global financial community continues to adapt, seeking innovative responses to emerging challenges.