The Looming Tariffs and Trade War in 2025: Can it really impact the DeFI Space?
The World has certainly gone through a roller — coaster ride this couple of months as while 2024 manages to end with a breath of fresh air, 2025 can’t seem to fill us with surprises. From the concerns of a recession to an escalating Trade Conflict, the world has been thrown into an uncertain situation for the rest of 2025 and beyond. Let’s look at the ever popular recent saga of Tariff War and explore its possible implications on the DeFI Space!
The Reciprocal Tariffs…
It’s been a strange couple of years for DeFI as the external factors of the economy continue to affect the growth and innovations within the space. Flashing back a year ago in 2024 where Bitcoin Spot ETFs was recently approved and we thought that the year was going to be record breaking in many ways. Despite Ripple’s case against the SEC, the year did unfold in a smooth sailing and picking up momentum in November where Bitcoin finally broke the $100k mark.
The momentum was obviously expected to carry on heading to the new year but it unfortunately dips back to the $80k mark as April comes along. Throughout its history the DeFI Space has always been perceived to be different from Traditional Finance and forms as an alternative to the Centralized Markets. This idea dates back to the original concept of the blockchain technology which performs in a peer to peer decentralized way.
While the operations of the DeFI Space may be separated, the value and adoption of Bitcoin along with other cryptocurrencies continues to be shaped by real life events and economic situations. We all saw this first hand during the Pandemic where in the midst of an Economic Slowdown, Bitcoin managed to break its all time high, partially due to growing amount of adoption and mostly due to the relax monetary policy that allows investment into the DeFI Space.
The year 2024 sneakily also brings in a new twist on the outlook for DeFI Space with the form of “Super Election Year” in which New Leaders for major countries are voted and elected. Amongst those is the re — election of Donald Trump for his 2nd term as the President of the United States with plenty of support and optimism towards the DeFI Space. As we all learn from his first term in 2016 that “Tariffs and Trade War” is a popular word along his Presidency.
The re-emergence of Reciprocal Tariffs in early 2025 was obviously expected as it was a calculated and familiar move rooted in the trade philosophy of Donald Trump. Those who remember his first term from 2016 to 2020 will recognize the playbook: tariffs used not just as an economic tool, but as political leverage. Trump’s economic strategy then was centered around the concept of “America First,” a policy that sought to strengthen domestic industries by discouraging imports, especially from China, through extreme trade measures.
Although the New Wave of Tariffs follows the same path as its predecessors, the aggressiveness of the measures is what caught some people off guard. Almost immediately after his inauguration in January, Trump reinstated aggressive tariffs on a range of Chinese goods which reach up to 145%, citing unfair trade practices, intellectual property theft, and a persistent trade imbalance. In response, China imposed retaliatory tariffs of their own, affecting U.S. agricultural exports, tech imports, and rare earth minerals.
Other Global Players such as the EU and India had to reluctantly be pulled over into this Trade War with each country protecting their own growing economies. Unlike in previous terms, where the focus was largely on traditional goods — steel, aluminum, cars — this time, the battlefield has expanded. Tariffs are now touching high-tech sectors, including semiconductors, AI hardware, electric vehicle components, and even server infrastructure that powers the future of Digitalisation.
Many questions are raised whether such aggressive moves are necessary in an economy that is already gripping with High Unemployment and High Interest Rates while its effect immediately shows as the S&P 500 plunges after this announcement. The reasoning behind the Tariffs is that the Trump administration believes that it would strengthen the local economy while asserting fairness on the Trade Deal with the rest of the world.
Most would argue that the Tariffs were a power move to the loss in the future industries such as Electric Car which has been taken over by Chinese Manufacturer BYD and Solar production which is controlled 80% by China. The Tariffs might be seen as a necessity with the Global Trade thrown out of the spanner and the recent rise of De — Dollarization, U.S are looking to re-balance their trade deficit with China in the long run for a more favorable Global Trade.
With the reciprocal tariffs being delayed by 90 days, this power struggle between the U.S and China will continue to forge as no conclusion seems to be on the horizon. While the Trump Administration has expressed its intention to negotiate with the countries affected, the global markets may have to continue with volatility and uncertainty on what the next move really is. And in the age of digital economies, those effects don’t stop at factories or retailers but it ripple into the tech world and even the decentralized financial ecosystem that, ironically, was built to exist outside of traditional politics.
The Outlook on DeFI 2025
While the renewed trade war may not directly target DeFI Space, it is not immune to the knock-on effects that are already reshaping the trajectory in 2025. The most immediate impact is on Market Sentiment which has induced uncertainty to the DeFI Space as a whole which swayed investors to retreat into safer assets such as Gold which are at an all time high. This Geopolitical Tension reflects on the Fear and Greed Index which are at Fear levels so far in 2025.
This flight from risk eventually causes capital outflows from the DeFI Space, draining liquidity from various platforms, reducing user engagement and falling adoption. DeFi’s infrastructure also is not as detached from global trade as it may appear with many blockchain networks dependent on cloud services (like AWS, Azure, and Google Cloud), which rely heavily on global hardware supply chains. All of this may hamper innovations and discourage New Projects within the space.
One of the long term impacts of the Reciprocal Tariffs will be the disruption of Cross Border Activity which is vital for Stablecoin and DeFI Space. Tariffs often lead to tightening of Capital Controls and can reduce participation from users in tariff-hit countries, limit developer collaboration, and fragment the global DeFi community. Stablecoin may be affected the most as its value are closely related to the National Currency which in many cases is USD and its liquidity relies on Global Transactions.
In a world more connected and more divided than ever, DeFI Space may find itself in a crossroads stuck between a Geopolitical Tension. Outlook for the DeFI Space remains high as A.I become more advanced and its integration become more seamless but it will be a slow growth to its all time high as Trade tensions become resolved. As trade wars reshape the financial landscape, DeFi will need to prove its resilience over the long run not just through its technology but also through adaptability and real life adoption. Time will tell what 2025 has yet to unfold!
We at Nagaya Technologies certainly believe that there is plenty to look out for as 2025 unfolds. Nagaya becoming the World’s First Hybrid Digital Asset continues our commitment to expand real-life adoption of Blockchain Technology in 2025 and beyond. Intrigued to know more about Nagaya, you can visit us at www.nagaya.co
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