Editor's Note: This article explores the value of cryptocurrency as a hedging tool in the context of escalating global trade wars and tariff barriers. The author points out that tariff policies drive up inflation, distort markets, and that historical evidence shows the drawbacks outweigh the benefits. In contrast, cryptocurrency, with its decentralization, sovereign attributes, and cross-border liquidity, may become a new asset choice to address geopolitical uncertainties and economic turmoil. Although cryptocurrencies (such as Bitcoin) have not yet fully demonstrated their hedging properties as "digital gold," the borderless economic system they are building is challenging the traditional financial order.

The following is the original content (for ease of reading and understanding, the original content has been restructured):

As the trade war reshapes the global economic landscape, cryptocurrencies are once again getting a chance to prove their worth as a hedge against chaos.

Background Context

"Madness is rare in individuals, but in groups, parties, nations, and epochs, it is the norm." — Friedrich Nietzsche

The market is experiencing severe turbulence. As the Prime Minister of Singapore stated, the United States is essentially abandoning the economic system it created. The cornerstone of the global economic system is gradually being dismantled. The author believes that if the situation cannot be quickly controlled, more sectors will face collapse.

Crypto Assets have always been macro-dominant assets. One of the core arguments that Bitcoin fundamentalists have championed throughout the year is 'sovereignty.'

In short - Bitcoin as an asset can hedge against geopolitical uncertainty, as it is theoretically a harder form of currency than gold. However, this theory has yet to be validated: Bitcoin's trading attributes are closer to the Nasdaq beta coefficient, and it performs far worse than gold during turbulent times. Will this time be different?

Analysis of the Essence of Tariffs

If you want to experience intellectual self-amusement, there is no better time than this moment to scroll through Twitter—everyone suddenly becomes a macroeconomist. To avoid increasing the cognitive load, I will only list objective facts:

Tariffs essentially create inefficiencies, raise consumer prices, distort free markets, and provoke economic retaliation and escalation of conflicts.

· Typical cases can be traced back to the 1980s: although President Ronald Reagan initially implemented tariffs in certain areas, he ultimately recognized their drawbacks. In a broadcast speech in 1987, he clearly stated: "Protectionism ultimately becomes destructionism, at the expense of jobs."

Why Tariffs Are Not a Good Thing

First, the effective tariffs currently being implemented by Trump are the highest levels in over 100 years — but there are many reasons to oppose them:

Economic Impact and Inflation

The core of tariffs is the tax levied on imported goods, paid by domestic importers, and these costs are often passed on to consumers. Historical and contemporary evidence consistently indicates that tariffs directly lead to higher consumer prices.

· For example, according to data from the Tax Foundation, the recent tariffs in the U.S. will increase the average tax burden on each family by more than $2,100.

· The Yale University Budget Lab estimates that the impact on each household may reach up to $3,800 annually.

· UBS Group predicts that even a mere 10% universal tariff could trigger a 10% drop in the stock market.

Misunderstanding of Trade Deficit

One of the core reasons often cited by supporters of tariffs is the huge trade deficit. However, the trade deficit itself does not necessarily indicate economic weakness or exploitation.

· It simply indicates that a country's imports exceed its exports, which is often driven by strong consumer demand, currency strength, or comparative advantages in services rather than goods.

· For example, the United States has long enjoyed a significant surplus in high-value service sectors such as finance, technology, and high-end manufacturing. Implementing tariffs on the goods trade deficit, especially in situations where many countries lack the wealth or demand to import American products, will only artificially raise prices for American consumers.

Countries like Cambodia and Kiribati are typical examples of this situation, where their trade deficits exist because these countries are too poor to purchase products made in the United States, rather than because they engage in unfair trade.

Historical Consequences of Tariffs

Historically, protectionist tariffs often lead to economic recession rather than prosperity.

Notable examples include the Tariff Act of 1828 and the infamous Smoot-Hawley Tariff Act of 1930. The latter exacerbated the Great Depression by triggering retaliatory tariffs, shrinking global trade, and deepening the global economic crisis.

Economists generally agree that history has repeatedly proven that tariffs often do more harm than good.

· Even McKinley, often cited by Trump as an inspiration for tariffs, began to oppose tariffs by the end of his presidency, acknowledging their negative impact on the economy.

The Myth of Low Efficiency and Job Creation

Tariffs are often promised to be used as a reason to revitalize domestic manufacturing and create jobs. However, modern manufacturing is highly automated and capital-intensive, which means that even if factories return to the United States, fewer workers are needed.

As global automation accelerates, the reshoring driven by tariffs will not bring about the job boom that politicians often promise.

· In fact, many manufacturers either absorb higher costs or inefficiently shift to other low-cost countries, resulting in negligible new job opportunities domestically.

· Its unintended consequences often lead to economic stagnation or recession. When Argentina adopted protectionist policies under Peronism, it transformed from one of the wealthiest countries in the world into an economic wasteland, from which it has yet to fully recover.

Strategic Risks in Global Trade Dynamics

Tariffs may inadvertently enhance the power of geopolitical rivals by triggering a realignment of global trade. Historical evidence emphasizes that trade wars are harmful globally, leading to economic contraction, supply chain instability, and significantly damaging consumer welfare.

· For example, the tariffs recently widely implemented by Trump not only raised domestic prices but also inadvertently benefited China by disrupting the supply chains of countries competing with China.

· Countries like Vietnam, which were previously positioned as alternatives to China, are now facing high tariffs and may shift production back to China due to its economies of scale and manufacturing efficiency, despite the high tariffs.

· In addition, tariffs may provoke retaliatory measures from trade partners, igniting a trade war. The EU has hinted at possible retaliatory tariffs, particularly targeting US tech companies, which increases the risk of a broader economic conflict.

The market dislikes uncertainty

Markets hate uncertainty, and tariffs bring exactly that uncertainty. Trump's recent tariff statements have led to significant turmoil in the markets, with stock market volatility rising sharply.

· Retail, technology, consumer goods, and manufacturing sectors are particularly affected, as they anticipate rising input costs and decreasing consumer spending.

· Furthermore, due to a decrease in global trust and a decline in capital inflows, tariffs have weakened the US dollar, leading to broader economic instability. This volatility has not only undermined consumer and business confidence but also suppressed investment, further hindering economic growth.

Misunderstanding of National Security

National security is one of the few legitimate reasons that can be used for limited strategic tariffs.

· However, the current tariff system is widely and indiscriminately applied, severely undermining the credibility of the genuine national security argument.

The current practice does not strategically protect key industries, but rather indiscriminately raises costs for almost all imported goods while harming both strategic and non-strategic sectors.

Crypto Assets: Hedging Chaos

Tariffs and trade wars strongly remind people that nations are ultimately composed of human groups driven by inherent emotions and tribal decisions—decisions aimed at benefiting their own groups, even if they seem irrational from a broader perspective. In such an environment, Crypto Assets become particularly important, as they represent true individual ownership and self-sovereignty, providing the highest form of economic agency in a world increasingly influenced by unpredictable geopolitical manipulations.

Crypto Assets → A super digital economy system for chaotic hedging.

As Ray Dalio aptly pointed out, trade conflicts rarely truly concern trade; they are more about identity, pride, domestic politics, and emotional interests. Meanwhile, amidst the clamor of geopolitical conflicts, Crypto Assets are quietly building an alternative economic infrastructure where tariffs and traditional borders no longer exist.

Traditional governments often struggle to accurately track digital services and the intangible economic activities involved in surplus and deficit calculations. Crypto Assets elevate this to a whole new level, encapsulating digital activities and transactions that transcend borders, tariffs, and political friction.

Technically, we still need to figure out how to properly combine the on-chain attributes of Crypto Assets with new business models (referring to my earlier point), but this is still in progress.

Conclusion: When government actions are unpredictable or unable to protect the interests of the public, how should global sovereign individuals allocate resources? Crypto Assets provide their own answer.

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