US tariff policies for 2025, which include 25% tariffs on goods from Canada and Mexico, a 10% tariff on Chinese imports, and 100% levies on automotive imports, are weighing on economic forecasts.
Analysts, including the London School of Economics, estimate that these measures could reduce GDP by 0.64% in the near term and contract long-run GDP by 0.2%. Reduced consumption and investment have pushed the Q1 2025 GDP estimate to -2.8%, according to the Atlanta Fed’s GDPNow.
Notably, GDPNow’s analysis highlighted “Government Exports” as the largest contributor to the decline at –3.57 percentage points, which is the largest single drag. This significant negative impact, along with smaller negative contributions from production and nonresidential structures, wasn’t fully offset by the positive factors, including private inventories, residential investment, and IP, leading to the net –2.8% forecast.
Tran Hung, CEO of Uquid, asked the question, “How will this play out?” while reviewing the GDPNow data,
“Did Trump’s rhetoric push the US
toward recession before tariffs even took effect?… How much do words impact the economy?”
Projections also foresee tariffs will “reduce hours worked by 223,000 full-time equivalent jobs, and reduce after-tax incomes by an average of 0.6 percent—before accounting for foreign retaliation.”
Further, according to the Peterson Institute for International Economics, median US households face an estimated $1,200 annual cost increase due to price hikes on imported goods and domestic substitutes.
How does this affect Bitcoin?
Bitcoin’s relationship with traditional markets has shifted dramatically since 2024. Following Trump’s election victory, Bitcoin initially decoupled from equities, surging 47%, while the S&P 500 gained just 4%.
By early 2025, Bitcoin reestablished a positive correlation coefficient of 0.483 with equities as both declined sharply amid inflation concerns and Federal Reserve policy uncertainty. The 30-day correlation peaked at 0.72 in January before falling to 0.54 by late February.
Currently, the correlation, specifically between US tech stocks and Bitcoin, is even stronger. Since late January, there have been ten sustained occurrences where Bitcoin became almost entirely correlated with QQQ, reaching near one on the correlation coefficient scale.
However, the chart below highlights the nine times Bitcoin was also negatively correlated with the Nasdaq index QQQ, showing that the link is far from perfect.
Overall, a visual analysis of both Bitcoin and QQQ clearly shows a general positive correlation over the past month.
The introduction of spot Bitcoin ETFs in January 2024 attracted equity-oriented institutional investors, increasing the relationship between Bitcoin and traditional equities.
The market reaction, dubbed the “Trump Tariff Shock,” has sent the S&P 500 down 3.4% since Feb. 19, while the US dollar index fell 2.4%. The Bitcoin price dropped around 13% during the same period.
Bitcoin’s correlation with equities appears to intensify during crises but weakens during crypto-specific bull markets. The COVID crash in 2020 saw Bitcoin fall as low as $4,800 on March 12 after the S&P 500 had declined 34% year-to-date.
Over the past day, Bitcoin’s correlation with QQQ rose to 0.94 alongside a lag due to US market trading hours compared to Bitcoin’s 24/7 market.
Thus, should the US equities market, especially tech stocks, continue to decline, Bitcoin is likely to follow suit, and potentially at an elevated rate.
As of press time, Bitcoin has risen around 2.4%. At the same time, the US market has been closed, aligning with QQQ futures trading, which also shows modest gains as US Secretary of Commerce Howard Lutnik suggested President Trump could reduce tariffs as soon as today.
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