China's response to Trump tariffs silently rocks bitcoin

China’s counterstrategy to President Trump’s hardline trade approach is subtly reshaping global capital flows, with effects extending even into cryptocurrency markets.

Since assuming office early last year, President Trump has imposed heavy import duties on most goods entering the United States, including products from China—the world’s second-largest economy and a central hub of global manufacturing. By January 2026, the average U.S. tariff on Chinese imports had risen to roughly 29.3%.

China, however, has adjusted to this pressure by leaning heavily on strict management of the yuan, which has become a core pillar of its economic response.

A recent JPMorgan analysis suggests that Beijing’s currency controls have helped sustain export competitiveness and limit deflationary risks, while simultaneously intensifying dollar-driven liquidity cycles during periods of trade friction.
Put simply, when trade tensions rise, China’s exchange-rate strategy tends to magnify movements in dollar liquidity—much like heavy rain worsening an already rising flood.

This dynamic matters for bitcoin, a macro-sensitive asset that typically declines when tariff-related uncertainty tightens dollar liquidity and recovers as those pressures ease. Bitcoin’s price action during the March–April trade escalation last year followed this exact pattern.

Unlike the U.S., where crypto prices are influenced more directly through capital flows into ETFs and alternative investment vehicles, China’s impact on digital assets appears to operate indirectly—via currency policy and global liquidity transmission.

This view aligns with perspectives from Arthur Hayes, who has argued that U.S.–China trade negotiations are largely symbolic, while the real economic adjustments occur behind the scenes.

In his framework, tariffs and talks provide the political narrative, but exchange-rate policy, capital controls, and Treasury-driven liquidity decisions ultimately shape market behavior.

JPMorgan’s outlook supports this interpretation. While China is unlikely to permit a meaningful rise in the yuan, the combined effects of tariffs, managed currency policy, and dollar liquidity continue to define the broader macro backdrop influencing bitcoin.

China’s economic resilience

JPMorgan Private Bank’s latest Asia outlook indicates that China’s export sector remains robust. Real exports are projected to grow by about 8% in 2025, with China’s share of global trade increasing to nearly 15%, despite extensive U.S. tariffs and a decline in exports to the U.S. to less than 10% of total shipments.

This strength reflects a strategic pivot toward ASEAN and other emerging markets, alongside a deliberate choice to tightly control the yuan rather than allow it to appreciate significantly.

Although the yuan has gained roughly 4% from its 2023 lows, its performance in calendar-year 2025 shows only a slight improvement against the dollar, highlighting how closely the currency is managed within a narrow range.

JPMorgan notes that recent yuan strength is likely seasonal, with the medium-term outlook pointing to continued stability as policymakers prioritize export competitiveness amid persistent deflationary pressures.

The bank also emphasized that the threshold for sustained yuan appreciation remains high, describing the currency as operating under a low-volatility regime where movements are largely dictated by the dollar.

For crypto markets, this reinforces a key takeaway: the focus is less on yuan appreciation itself and more on how liquidity flows are transmitted through the global financial system.

Voice Of Osiz:

At Osiz, we see this evolving U.S.–China trade dynamic as more than geopolitics—it’s a liquidity story reshaping global markets. China’s managed currency strategy is quietly influencing dollar flows, which in turn impacts macro-sensitive assets like Bitcoin. As tariffs tighten risk sentiment, liquidity contracts, triggering volatility across crypto ecosystems. When tensions ease, capital flows rebound, reinforcing crypto’s cyclical nature. This underscores why businesses and investors must track FX policy alongside blockchain innovation. In a rapidly shifting global economy, understanding liquidity is key to building resilient digital financial systems.

Source: Coindesk