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Hi Reader,
Thanks for reading The BlockByte Weekly, where we summarise the key updates in crypto over the last week and provide our perspective on what you need to know as an investor.
Introduction
Trump and his politics are so divisive that it's become hard to talk about tariffs rationally without triggering intense emotional responses from people both on the right or left, with an increasingly vanishing middle ground. My aim in this article is to avoid politics and provide a principled look at what tariffs are, why they're being used, as well as both the pros and the cons. To conclude, I'll give my perspective on what it might mean for your digital asset investment portfolio in the years ahead.
What are Tariffs?
Tariffs are a cost charged by the country receiving goods (the importer), paid by the exporter or end consumer, or some combination of both. As Ray Dalio notes, “exporters might eat some cost, but consumers often bear the brunt when alternatives are scarce.”
On April 5th "Liberation Day", Trump announced global 10% tariffs on all trading partners, with an additional 'reciprocal tariff' imposed on countries like China, Cambodia and Vietnam where they face ~50% tariffs. As we'll cover later in this article, these reciprocal tariffs were not actually in response to tariffs faced by the US, but calculated based on the US trade deficits with each country. We'll circle back on why we believe trade deficits and a phenomenon called the 'Triffin Dilemma' are the underlying driver of Trump's economic policy shift.
Next though, let's breakdown some of the bad and the good things about tariffs:
What are the Cons of Tariffs?
- Increased Barriers & Cost to Trade: Tariffs are inherently anti-globalisation, erecting barriers that increase friction and trading costs The Tax Foundation (April 5, 2025) estimates Trump’s tariffs—starting with the 10% baseline and escalating to reciprocal rates like 46% on Vietnam or 54% on China—will slash U.S. imports by $800 billion in 2025 alone, a 32% drop from 2024’s $2.5T import total. U.S. GDP could shrink by 0.7%—a $180B hit based on 2024’s $26T economy.
- Inflation: Tariffs drive up prices for consumers, hitting everyday imports like chocolate, cars, or electronics. The Tax Policy Center (April 5, 2025) estimates an additional cost of $1,800 per U.S. household in 2025—$230B nationwide—based on the 10% baseline and higher rates. Importers pay the duties (e.g., $540K on a $1M Chinese shipment at 54%), but pass most of this to consumers via higher prices.
- Fall in Business Confidence & Reduced Domestic Investment: Uncertainty from Trump’s tariff regime stalls investment, threatening a broader economic slowdown or recession. With Trump hinting at negotiable tariffs—“I’d talk if they offer something phenomenal”, the uncertainty keeps firms guessing. Domestic manufacturers will hesitate to build new plants if tariffs could drop in 12 months, re-exposing them to cheap imports. The National Association of Manufacturers warns this “hesitancy could freeze $500B in planned 2025 capex.”
What are the Pros of Tariffs?
- Bargaining Chip: Trump has repeatedly called existing tariffs on U.S. goods “unfair”. He argues that countries like China, India, and the EU impose higher barriers—tariffs, subsidies, or regulations—on American exports than the U.S. does in return, creating an uneven playing field. Political commentators see this as Trump playing hardball, using tariffs as leverage to force concessions. In Trump's own book, The Art of the Deal, he writes, “Leverage is having something the other guy needs”—here, it’s access to the U.S.’s $17T import market.
- Onshoring of Strategically Important Sectors: Tariffs aim to protect and revive industries critical to U.S. security and innovation—AI, defense, semiconductors, and manufacturing—by making imported alternatives costlier. The argument: if everything’s outsourced, what’s left in 50 years? A nation of consumers, not producers, vulnerable to supply shocks or geopolitical rivals. The Consumer Brands Association told CNBC (April 2, 2025) that “supply chains are tapped out after decades of offshoring,” with tariffs potentially shifting production home. Trump’s 25% steel tariffs and 54% on Chinese tech goods target this shift.
- Raising Government Revenue: Tariffs generate significant revenue to address the U.S.’s mounting fiscal deficits, providing funds to offset trade imbalances and refinance debt without hiking domestic taxes. The Tax Foundation projects Trump’s tariffs—10% baseline plus reciprocal rates like 54% on China—could raise $2.9T over a decade, with $300B in 2025 alone.
- Lowering Debt Refinancing Costs: Another major factor which is often overlooked is that the US has $9.2T in debt maturing this year. As people flee risky equity markets into bonds, it pushes the interest (also called the coupon) on the bond lower. With the 10-year Treasury yields having fallen from 4.5% in January to 3.8% by April, the US has effectively slashed its refinancing costs for that $9.2T. This drop, partly driven by tariff-induced market jitters could be a deliberate move—suppressing markets now to lock in lower rates.
@tanvi_ratna
Start with the debt: $9.2T must be refinanced in 2025.If rolled into 10-yr bonds, every 1 basis point drop in rates saves approx $1B/year; so a 0.5% drop would save $500B over a decade.Lower yields free up fiscal room—without them, core spending gets crowded out.
Tanvi Ratna
@tanvi_ratna
Trump’s new tariffs aren’t a trade tweak—they’re the first move in a full-spectrum reset.$9.2T in debt matures in 2025. Inflation lingers. Alliances are shifting.One announcement just set a dozen wheels in motion.Here’s what’s really happening—and why it matters 🧵
6:37 AM • Apr 4, 2025
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Conclusion
The Triffin Dilemma
Observed by economist Robert Triffin in the 60s, the Triffin dilemma exists when the world’s reserve currency is needed in increasing quantities to satisfy growth in global trade. The dilemma occurs because in order to meet the growing demand for the reserve currency (in this case the US dollar), the reserve currency nation relies on running a trade deficit (exporting more dollars) than what it brings in in equivalent value from other countries. Over time, the build up of these trade deficits lead to large debt burdens, loss in confidence of the reserve currency and ultimately a reset or establishment of a new monetary system.
Final Thoughts & Potential Impact on Investor Portfolios
As debts mount for the US, faith in the US dollar will be increasingly called into question. Investors should hold a diversified portfolio of assets which includes international equities, bitcoin, gold and other asset types. Whilst we acknowledge the power and potential of the US capital markets, differentiated stores of value beyond the US dollar will increasingly be considered by countries, institutions and investors alike. Whilst gold has been the star performer over the last year (up 32.6%), bitcoin has demonstrated remarkable resiliency in the face of the trade war thus far. Over time, we expect bitcoin to emerge as the ultimate beneficiary due to its decentralised nature and superior properties for global trade when compared to gold. For alt coins, (Solana, Ethereum, XRP) etc. we expect to see significantly more volatility as these assets are much more correlated to risk on markets. Should we get unilateral trade agreements and a de-escalation of tariffs, these assets would be amongst the largest beneficiaries as investors risk sentiment increases. Until then, bitcoin remains our safest bet for the digital asset market.
I appreciate this week was a change in tact to our normal newsletter style, but I hope you enjoyed reading this as much as I enjoyed writing about it.
Until next week,James
James BrannanManaging DirectorBlockByte(+61) 412 393 634james@blockbyte.com.auhttps://blockbyte.com.au/
BlockByte does not provide financial advice. We provide a personalised brokerage service with tailored support, research and secure custody for investing in digital assets. Reach out to our team to discuss how we can help.
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