Bitcoin Spikes, Dollar Jumps on U.S.–China Trade Break

Background of the Trade Conflict Earlier in 2025, the trade conflict between the United States and China escalated to one of its highest points in recent years. The U.S. raised tariffs up to 145% on Chinese imports under several executive orders. In response, China issued matching duties of up to 125% and imposed additional non-tariff barriers, including export limits on rare earth materials. These actions froze around $600 billion worth of bilateral trade and intensified global supply chain pressure. Following days of talks in Geneva, both governments released a joint statement outlining a three-month pause on further escalation. Under this agreement, both sides will roll back parts of the tariffs and remove specific trade penalties introduced since early April 2025. According to the joint release, the United States will suspend 24 percentage points from the tariff hike enforced under Executive Order 14257. This suspension lowers the rate on Chinese goods—including those from Hong Kong and Macau—to 10% for a 90-day period. Additionally, the U.S. will completely remove the extra tariffs imposed under Executive Orders 14259 and 14266, issued shortly after the April spike. In parallel, China will match this move by reducing its duties on U.S. goods. It will suspend 24 percentage points of its imposed tariffs under its April Announcement No. 4, also bringing the new rate down to 10% for the same 90-day period. Furthermore, China will cancel all added duties introduced in Announcements No. 5 and No. 6. It also agreed to lift all non-tariff countermeasures taken against the U.S. since April 2, including any export bans or restrictions that disrupted U.S.-bound shipments. Both countries stressed that these changes will take effect no later than May 14, 2025. To prevent further breakdowns, the two sides also agreed to establish a structured communication channel. This mechanism will oversee trade issues and maintain dialogue beyond the 90-day window. From China, Vice Premier He Lifeng will lead the efforts. On the U.S. side, Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will represent American interests. Future discussions may rotate between China, the United States, or a neutral third country, depending on mutual agreement. The mechanism allows for working-level consultations to continue between larger sessions, ensuring constant updates on tariffs, trade barriers, and other pressing issues. This framework signals a willingness from both sides to avoid further trade escalation while addressing unresolved concerns through scheduled negotiations rather than abrupt policy changes. Impact on Cryptocurrency Markets The easing of trade tensions has also influenced cryptocurrency markets. Bitcoin, which had declined earlier amid economic uncertainty, bounced back sharply and now trades near $104,672. This recovery follows weeks of volatility triggered by former U.S. President Donald Trump’s tariff announcements on what was dubbed “Liberation Day.” After falling to $75,000 on April 7, Bitcoin rallied steadily through late April and early May, gaining 27% by the end of April. On May 12, Bitcoin briefly climbed above $105,000 during intraday trading, marking its highest level since mid-March, while traditional equity indices like the S&P 500 and Nasdaq posted weaker performance. Analysts believe this divergence signals growing investor interest in Bitcoin during macroeconomic disruptions. According to crypto trader Daan Crypto, Bitcoin’s outperformance in April sparked debate over whether it is acting as a hedge—possibly even as a tool used by some countries to sidestep traditional trade routes affected by tariffs. However, with the U.S.–China agreement now in place, Daan suggests this trend could reverse. he wrote. This view implies that if Bitcoin continues to rise despite reduced geopolitical tension, its price strength may stem from factors unrelated to tariffs. Yet, other voices in the market see continued upside potential for Bitcoin in this new trade environment. Jeff Mei, Chief Operations Officer at crypto exchange BTSE, explained that improving U.S.–China relations may reduce institutional hesitation. He noted that ongoing trade talks, combined with a possible pivot in interest rate policy, could support more capital flowing into crypto markets. Jupiter Zheng, researcher at HashKey Capital, echoed this view. He said the trade deal could foster global market stability, prompting investors to reallocate funds into riskier growth sectors—including digital assets. Zheng pointed out that if the trade deal weakens the dollar or stimulates emerging market liquidity, Bitcoin could hit new highs. Analyst Will Clemente added a more cautious take, noting that the crypto market now waits for a concrete outcome. he posted on X. He observed that momentum in Bitcoin markets has started to slow, hinting that investors may want confirmation before pricing in further gains. Overall, Bitcoin’s recent rally may reflect a mix of safe-haven demand, liquidity optimism, and speculative positioning. Whether the U.S.–China deal reinforces or diminishes that momentum will likely depend on how both traditional and crypto markets digest the longer-term economic implications of the tariff rollback. This upward breakout signals renewed market confidence in the dollar as investors responded to easing trade tensions. The rally reflects a shift toward risk-on sentiment, with traders pricing in potential improvements in cross-border trade flows and inflation stability. Historically, the DXY strengthens when global trade risks decline and investors anticipate more stable U.S. monetary conditions. As shown in the chart, the green candlestick formed immediately after the Geneva agreement headlines, highlighting how quickly currency markets reacted to the news. The momentum may also influence upcoming decisions by the Federal Reserve, especially if the trade truce contributes to better economic data in the coming weeks. European and Asian stock markets reacted positively to the U.S.–China tariff pause, with major indices posting solid gains on May 12, 2025. Broad-based bullish sentiment spread across both regions, as investors welcomed signs of easing trade tensions. In Europe, the DAX index in Germany rose by 165.28 points (0.70%) to reach 23,664.60. France’s CAC gained 55.03 points (0.71%), while the FTSE in the U.K. climbed modestly by 5.21 points (0.06%). All three markets displayed a “Very Bullish” technical outlook, reflecting improved investor confidence, especially in sectors such as automotive, industrials, and energy, which are highly exposed to global trade dynamics. Asian markets mirrored this strength. India’s GIFT NIFTY jumped by 859.00 points (3.57%), Hong Kong’s Hang Seng gained 681.72 points (2.89%), and Taiwan ’s benchmark rose by 214.50 points (1.02%). South Korea ’s KOSPI increased by 30.06 points (1.15%), and even China’s Shanghai Composite added 27.24 points (0.81%). Most Asian indices were also marked as “Very Bullish” or “Bullish,” showing momentum across diverse sectors including mining, tech, and export-heavy manufacturing. The rally was strongest in economies directly affected by U.S.–China trade flows. With tariffs being lifted temporarily and trade routes expected to normalize, market participants appeared to price in expectations of smoother export operations and higher earnings across industrial supply chains. The data, with synchronized gains across regions and asset classes, underscores the global impact of the Geneva agreement on risk sentiment. The 90-day tariff pause offers short-term relief, but lasting resolution of U.S.–China trade issues remains unclear. Both governments committed to further talks, though progress will depend on internal economic conditions and geopolitical shifts.