Key Takeaways
- The global trade war enters its next chapter, with the US officially applying reciprocal tariffs in what Trump has dubbed ‘Liberation Day’.
- Consumer confidence has tumbled since this trade war began in 2025.
- Chart of the week: Comparing Bitcoin’s performance against corporate credit markets. Let’s pull up the hood on how risk tolerance in the broader market can help measure Bitcoin’s trend.
Liberation Day has landed, as dubbed by the White House, marking the official release of the much-awaited reciprocal tariffs. While it’s anyone’s guess on the near-term effects of the reciprocal tariffs, the way I see it, the base case is for chop.
For context, the US by country has the biggest consumer market in the world. Because of this, some nations tax imports from the US to protect their domestic industries. The rationale from President Donald Trump is that these trade rules between the US and countries producing goods to sell in the US were unfair.
He argued it’s reasonable that the U.S. tax imported goods the same way other countries tax American exports.
As a result, we now know a 10% across the board tariffs will be applied starting April 5th, and reciprocal rates against certain countries will kick in April 9th.
Crypto markets seemed optimistic heading into the news, with Bitcoin rallying to US $88,500 at the 6:00am AEST press conference, where it has since fallen -7% at the time of writing. It’s possible the markets expected better news, and this tariff agenda put to bed. We know now this is likely not the end.
It’s entirely possible that we continue to see volatility rise as the immediate reaction to the tariffs unfolds. Likely, the market does what it does best, and prices in this news as it evolves. And that highlights another unknown for the market to deal with – the impact of rebuttals from other countries.
All in all, it’s hard to see how this event gets us any closer to a resolution of this ongoing trade war.
I mean – is it really that unreasonable to expect some kind of Art of the Deal’-style move from Trump, even with an announcement this big?
Consumer confidence slumps
Unsurprisingly, the way consumers in the US view their own financial situations is back levels not seen since 2022. Where the world was in the throes of elevated inflation levels following the Covid stimulus period.
Sentiment took a hit at the start 2025 when this trade war started to kick off and has kept falling since.
Tariffs will at the end of the day likely result in higher costs for goods and services for consumers in the US, so this increase in pessimism – while unsurprising – is key to call out.
Looking at the data, there is an optimistic spin that we are at relative extremes in this measurement. In the past, these levels are where we have seen reversals develop. However, we wait to see if that will be the case in the coming months.
A lot is riding on the global response to Trump’s ‘Liberation day’.
Chart of the week – comparing Bitcoin’s performance against corporate credit markets
So how does the trade war and this lack of consumer confidence stack up against other periods of uncertainty? Is the market risk off?
Corporate credit markets provide a useful gauge of how much risk investors are willing to take in the current market environment. It’s an interesting way to understand how Bitcoin – one of the most risk-on assets available – fits into the broader picture.
Businesses seek investment for growth, and growth strategies come in many shapes and sizes. So, when investors look at buying corporate bonds, the rating of the assets vary as not all businesses carry the same level of risk. The chart below highlights this by showing the difference in yield between ‘BB’-rated companies (riskier) and ‘AAA’-rated companies (safer), represented by the black line.
When investors want to avoid risk, the demand for ‘safer’ assets increases – raising the yields of risker bonds, and we see the spikes and increases in the spread (black line).
Therefore, this risk spread has widened significantly during major crises – from the Global Financial Crisis (GFC) to the Covid pandemic and the recent inflation-driven downturn since 2022. No one wants to invest in companies providing payday loans for NFTs during a financial crisis.
What you need to know about this chart is the higher the black line moves, the less comfortable the market is to take on riskier investments.
When we overlay Bitcoin’s price performance, we see a simple correlation.
- Corporate risks spreads trending higher, Bitcoin has trended lower.
- Corporate risks spreads trending lower, Bitcoin has trended higher.
Since 2025 began this risk metric has been moving to the upside, during which times we have seen Bitcoin take a -30% hit its year-to-date all-time high.
Despite this, risk spreads are still well below previous levels of instability – so investors aren’t completely risk-off for now.
Observing the direction of this index in the coming weeks will help give additional context on what to potentially expect for Bitcoin next.
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