Global Financial Markets in Turmoil: Crypto Assets Experience Big Dump, Tariff Policies Trigger Chain Reactions

The impact of the countervailing tariff policy far exceeded expectations, triggering violent turbulence in the global financial markets. This Monday, global stock markets, commodity markets, and Crypto Assets markets all suffered heavy losses. The three major U.S. stock indices continued to fall, and European and Asian stock markets also saw significant declines. Commodities such as crude oil and gold were similarly not spared, with prices significantly dropping.

The crypto assets market has also not been able to remain unaffected. Bitcoin fell more than 10% within two days, briefly dropping below the $75,000 mark. Ethereum plummeted by 20%, falling below $1,500. Other small-cap crypto assets suffered even more severe blows. According to statistics from a certain data platform, more than 480,000 traders were liquidated in just one day, with a total liquidation amount exceeding $1.632 billion. Among them, long positions accounted for $1.25 billion, while short positions accounted for $380 million.

This series of turmoil stems from the recent signing of two executive orders by the U.S. President regarding "reciprocal tariffs." The orders announce a "minimum baseline tariff" of 10% on trade partners and impose higher tariffs on certain trading partners. This move has triggered trade frictions on a global scale, with multiple countries subsequently taking countermeasures.

In the face of the market's violent reaction, the U.S. president has shown a certain calmness, likening it to the process of "taking medicine when sick." However, whether this policy is a good remedy for the problems or a dangerous move that may exacerbate economic difficulties remains controversial.

The global financial markets reacted strongly to this. US stock futures continued the decline from last week, with Nasdaq futures falling more than 5% and S&P 500 index futures dropping over 4%. European stock index futures also plummeted, with significant declines in both the European STOXX 50 index futures and DAX index futures. The Asian markets were not spared either, as the Japanese and South Korean stock markets experienced a sharp drop once again. The Hong Kong Hang Seng Index recorded its largest single-day fall since October 1997.

The chain reaction triggered by the tariff policy is not limited to the financial markets. Politicians and economists in multiple countries have warned that the U.S. could fall into recession due to this radical policy. The Prime Minister of Canada and the CEO of a large U.S. asset management company expressed similar views. A survey showed that 69% of business leaders expect a recession in the U.S., with more than half believing it will arrive this year.

Nevertheless, the U.S. government does not seem to intend to change its policy direction. Government officials have revealed that over 50 economies have engaged with the U.S. regarding tariff policies, but the U.S. President stated that he would not suspend tariff measures.

Analysts believe that the main purposes of the reciprocal tariff policy include three aspects: first, to improve the trade imbalance situation in the United States; second, to increase U.S. fiscal revenue; and third, to serve as a bargaining chip in diplomatic negotiations. However, the negative impact of this policy seems to have exceeded expectations, triggering an escalation of trade frictions globally.

The impact of tariff policies on the U.S. economy has attracted widespread attention. Research institutions generally believe that the new tariff policies may raise the U.S. price level by 1-2.5%. At the same time, several institutions predict that the tariff policies will have a negative impact on U.S. GDP growth, with JPMorgan raising the probability of a U.S. recession in 2025 from 40% to 60%.

In the face of economic downturn pressure, market expectations for the Federal Reserve's policies have changed significantly. Currently, traders generally expect a rate cut of 125 basis points by the end of the year, equivalent to 5 cuts of 25 basis points each. The probability of a rate cut by the Federal Reserve in May has risen to 57%.

Despite the low market sentiment, there are also signs that yesterday's big dump may be partly due to panic rather than substantive economic recession. Several countries have begun taking measures to stabilize the market, such as the Chinese national team entering the market to buy ETFs and the Japanese and Korean stock markets opening higher across the board today.

For the Crypto Assets market, despite suffering a heavy blow, there has been a certain degree of rebound. Bitcoin has risen to around 80,000, while Ethereum has returned above 1,500. However, market participants still have divergent views on the future direction. Some analysts believe that if China and the U.S. fail to reach a trade agreement by April 9, market sentiment may deteriorate again.

Overall, the global financial markets are facing significant uncertainty brought about by tariff policies. The Federal Reserve's policy direction will become the focus of market attention, as the Fed will release the minutes of the March monetary policy meeting this Thursday, which may provide more clues for the market. Before that, market volatility may continue, and investors need to stay vigilant.