Understanding the Impact of Tariffs on the Crypto Market
The cryptocurrency market has been experiencing a prolonged period of stagnation, and recent reports suggest that new tariff policies in the United States may be a contributing factor. According to research from Germany’s Kiel Institute for the World Economy, tariffs imposed between January 2024 and November 2025 have had a significant impact on the U.S. economy, influencing liquidity levels that are critically tied to the performance of crypto markets.
The Key Findings of the Tariff Study
The study analyzed $4 trillion worth of shipments and concluded that U.S. importers and consumers absorbed 96% of tariff costs, leaving only 4% to be absorbed by foreign exporters. Contrary to popular political claims, the research highlights that these tariffs function more as a hidden consumption tax rather than a direct cost to foreign producers. As a result, American importers either bore the costs themselves or subtly passed them along to consumers over time.
This slow-moving cost absorption has significantly tightened financial conditions. Retailers and businesses saw squeezed profit margins, and consumers had less discretionary income to invest in speculative assets like cryptocurrencies. This ongoing pressure on liquidity may explain why the crypto market has seen limited movement despite avoiding a bear market scenario following the October sell-off.
Tariffs, Inflation, and Discretionary Liquidity
While U.S. inflation remained moderate, sitting at 1.57% year-over-year as of late 2025, the delayed pass-through of tariff costs has caused a gradual erosion of purchasing power. This hidden tightening of financial conditions has left consumers and businesses with less excess capital, which is often critical for fueling growth in speculative and high-risk markets, including cryptocurrency.
Importantly, cryptocurrency markets thrive when there’s high discretionary liquidity. With tariffs quietly draining this liquidity, the market has reached a plateau. There is not enough momentum to drive a significant upward trend, but the current conditions have also prevented a major crash. Future easing of inflation might reignite liquidity, but tariffs have so far acted as a persistent drag on recovery.
What This Means for Crypto Investors
As tariffs continue influencing financial conditions, the crypto market is likely to remain in a state of limited movement. Investors should prepare for extended sideways markets and focus on projects that demonstrate resilience in tight liquidity conditions. Tools such as Trezor wallets for secure crypto storage (check it out here) may be helpful as part of a broader long-term strategy for safeguarding assets while waiting for market conditions to improve.
Overall, while tariffs are not the sole cause of market stagnation, they are an important factor contributing to the lack of momentum in the industry. Investors should stay informed about macroeconomic policies and their potential impact on discretionary liquidity as they navigate this challenging landscape.
