Trade conflicts are nothing new in the global economy, but few have impacted global markets as dramatically as the renewed US–China trade war in 2025. Triggered by aggressive actions from the Trump administration and met with swift retaliation from Beijing, this confrontation showed just how sensitive today’s markets are to shifts in geopolitics.
For traders, it’s important to understand what happened, which events mattered most, and why trade wars act like a “litmus test” for market sentiment. Let’s walk through the key stages of the conflict and how different markets reacted.
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The First Strike
2025 began with Donald Trump’s return to the White House, and almost immediately, he signaled a tougher approach to trade policy. On April 2, new tariffs were introduced, triggering a major market reaction: U.S. stock indices lost trillions in market value within days. At the same time, the Chinese yuan weakened sharply, and Bitcoin and other major cryptocurrencies dropped by about one-third.
But this wasn’t just about tariffs. Markets saw these moves as a warning sign of a broader economic slowdown ahead.
China’s Counterattack
Later in April, China responded with its own 34% tariffs on U.S. imports. But this round of escalation went beyond just tariffs. China also introduced non-tariff measures, including restrictions on exports of rare earth metals, critical for electronics and defense.
Markets reacted strongly — not just because of direct economic losses, but because of growing uncertainty. Stock prices in both countries kept falling, and currency market volatility jumped.
Interestingly, the crypto market didn’t follow its usual pattern. After the initial sell-off, Bitcoin entered a holding pattern. Many investors had already priced in the risk and chose to wait, largely ignoring day-to-day news.
The Peak of Confrontation
By the end of April, both countries had added even more tariffs, with rates rising above 100% — effectively making trade between them unprofitable. On top of that, China suspended shipments of key raw materials, further disrupting global supply chains.
This hit some U.S. industries hard and raised fears of a possible recession. However, an unexpected twist came from the Chinese yuan, which stabilized thanks to direct intervention from the People’s Bank of China. Meanwhile, cryptocurrencies began a slow, cautious recovery, as investor confidence gradually returned.
Truce in Geneva
In May, a temporary truce surprised markets. After negotiations in Geneva, both sides agreed to lower tariffs to around 30%, providing much-needed relief.
Markets responded quickly. U.S. and Chinese stock indices rebounded, and emerging market currencies strengthened. But despite the optimism, traders stayed cautious, aware that the underlying issues still hadn’t been resolved.
A New Threat
Later in May, the trade war shifted into a “tech war” phase. Both countries imposed new restrictions on exports of high-tech goods and critical components.
For the first time, it became clear that this conflict wasn’t just about tariffs anymore. It had the potential to disrupt global supply chains and directly impact individual companies and entire sectors. Despite the seriousness of the situation, the markets remained relatively stable — waiting to see how the next round of negotiations would unfold.
The London Deal
The conflict reached a turning point during talks in London, where both countries signed a preliminary agreement. The deal lifted the most severe export restrictions and locked tariff rates at more manageable levels.
This outcome had been expected, but one thing surprised traders: the reaction from Bitcoin. While stock markets climbed steadily, Bitcoin surged sharply, reaching new highs much faster than equities.
This signaled a shift in how cryptocurrencies are viewed. No longer seen only as risky assets, they started to act more like indicators of market sentiment — sometimes even ahead of traditional markets.
Final Thoughts
The events of 2025 clearly showed that markets react not just to economic data, but to investor expectations. This was especially true in the case of cryptocurrencies, which by the end of the conflict were behaving more like leading indicators than reactive ones.
For traders, the key takeaway is this: it’s not enough to just follow the news or look at hard numbers. You also need to understand how markets are interpreting those events — and what they expect to happen next. In today’s world, successful trading during events like trade wars comes down to your ability to spot signals early, often before they become obvious to everyone else.
