Rising to 245% For China, Trump’s tariffs have once again heated up the market with uncertainty. Will the Fed still cut interest rates this year?

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The global financial market is once again at a crossroads filled with uncertainty. Bank of America (BofA) predicts that the Federal Reserve (Fed) will cut interest rates four times in 2025, providing a breath of fresh air for crypto markets such as Bitcoin (BTC) and altcoins.

On the other hand, escalating trade tensions between the United States and China, coupled with the threat of a recession, are creating significant pressure on risky asset markets, including crypto.

This article reviews the Fed’s monetary policy predictions, the impact of trade tariffs, and the dynamics of the crypto market amid global economic turmoil.

Fed Interest Rate Cut Predictions

According to the latest report from Bank of America, the Federal Reserve is expected to cut interest rates in May, July, September, and December 2025. This forecast is based on U.S.

Consumer Price Index (CPI) and Producer Price Index (PPI) inflation data showing a downward trend below market expectations. This more accommodative monetary policy is seen as a positive catalyst for risky asset markets, including cryptocurrencies.

“Interest rate cuts will create an environment supportive of crypto market growth,” said BofA analysts in the report. With increased liquidity, investors are expected to channel capital into assets like Bitcoin and altcoins, which often react positively to fundamental macroeconomic changes. This move is also seen as the Fed’s response to economic pressures, including the potential slowdown in growth due to global trade tensions.

However, this optimism comes with challenges. The cryptocurrency market, despite showing resilience, faces pressure from trade uncertainties and the threat of a recession.

Bitcoin prices, for example, recently surged above $86,000 but plummeted below $85,000 after the European Union announced retaliatory tariffs on US goods. These tensions are exacerbated by China’s insistence that it will not back down from the trade war unless the US removes its retaliatory tariffs.

US-China Tariff Escalation and Its Impact on Global Markets

US-China trade tensions have flared up again after the White House announced tariffs of up to 245% on certain Chinese imports, though without clarity on the specific imports affected.

This move was intended to demonstrate the US’s firm stance and signal serious consequences for China’s retaliatory actions. However, the lack of specifics in the announcement created ambiguity, triggering volatility in financial markets.

Chinese media and officials responded firmly, reiterating their commitment to protect national interests while pushing for negotiations based on mutual respect. Meanwhile, China’s economic data showed first-quarter GDP growth of 5.4%, exceeding expectations.

But Global investment banks cut their annual growth projections for China, citing concerns over declining exports to the US and a slowdown in capital spending. With China’s export share to the US now at 14.7%, down from 19.2% in 2018, the fragmentation of global supply chains is becoming increasingly evident.

Global stock markets have also felt the impact. S&P 500 futures plunged 2,24% in early Wednesday trading, dropping to 5,275.70, erasing the previous two days’ gains. This decline was triggered by uncertainty surrounding US trade policies, including potential new tariffs targeting Chinese semiconductors and pharmaceuticals.

Meanwhile, the semiconductor sector faced additional pressure. Nvidia revealed that U.S. government licensing requirements would limit exports of its H20 AI chips to China, resulting in a projected revenue loss of $5.5 billion.

This move is seen as part of the U.S. strategy to restrict China’s access to advanced semiconductor technology. In Europe, shares of chip-making equipment companies such as ASML and ASM International plunged 6.5% and 4.5%, respectively, weighing on the Stoxx 600 index, which fell 0.8% at the open.

Bitcoin and Other Assets Amid Turmoil

Amid this tension, Bitcoin has shown lackluster performance over the past 24 hours. At the time of writing, Bitcoin was trading around $83,400, moving sideways after a sharp correction from overnight losses.

This movement contrasts with the defensive trend in traditional markets, where gold surged 2.7% to a record high of $3,261 per ounce, and 10-year US bond prices rose 0.55%. Even China’s 10-year bonds recorded a slight increase of 0.19%.

Other assets, such as oil and S&P 500 futures, also faced selling pressure. Oil fell 1.13%, while E-mini S&P futures (ESM2025) plunged 2.06%.

The US dollar index (DXY) weakened by 0.44%, partly due to negative sentiment surrounding trade decoupling. Bitcoin itself fell 2.8% over the same period, underperforming compared to other assets like oil and S&P futures, which recorded smaller losses.

When viewed over a longer timeframe since early April, Bitcoin has shown relative resilience. The digital asset rose over 5%, outperforming S&P 500 futures, which fell over 4%, oil, which plummeted nearly 13%, and the dollar index, which weakened 4.5%. Only gold outperformed Bitcoin, with a nearly 6% increase over the same period.

Crypto Market Resilience Amid Recession Threats

Despite external pressures, the crypto market continues to show signs of resilience. BlackRock CEO Larry Fink warned that the US may already be in a recession.

Boston Fed President Susan Collins emphasized that the central bank is ready to take stimulus measures if necessary. The combination of interest rate cuts and the Fed’s swift response to recession signals is expected to drive short-term gains in crypto prices.

Analysts suggest that Bitcoin’s current stagnation may reflect a reassessment of its role as a macro hedge asset. Unlike gold, which has seen strong demand amid inflation risks from tariffs, Bitcoin has not shown similar sensitivity to global macro catalysts in the short term. Uncertainty surrounding spot ETF fund flows could also impact Bitcoin’s performance, despite the evolving institutional narrative around Bitcoin’s role as a macro hedge.

Market Outlook and Recommendations for Investors

Market reactions to US-China tensions have highlighted increased demand for safe-haven assets like gold and government bonds. Bitcoin’s stagnation amid tariff escalations and falling stock futures signals caution among investors who are still weighing the asset’s correlation with broader risk markets.

With the White House emphasizing that future negotiations depend on Chinese concessions, markets appear to be bracing for prolonged tensions.

For crypto investors, volatility triggered by trade uncertainty and recession threats demands vigilance. While Fed rate cuts could serve as a positive catalyst, pressure from tariffs and global supply chain fragmentation remain significant risks.

It is advisable to monitor trade policy developments and macroeconomic data, such as inflation and GDP growth, to anticipate short-term market movements.

The cryptocurrency market, with all its potential and challenges, remains in the spotlight amid the complex dynamics of the global economy. With predictions of looser monetary policy and ongoing trade tensions, investors should prepare for a period of intense volatility.