New research reveals that U.S. tariffs are functioning as a domestic consumption tax, quietly draining discretionary capital and contributing to the cryptocurrency market's prolonged stagnation. A study by Germany's Kiel Institute for the World Economy, cited by The Wall Street Journal, analyzed $4 trillion in shipments between January 2024 and November 2025. It found that American consumers and importers absorbed a staggering 96% of the costs from tariff increases, while foreign exporters bore only about 4%.
"Nearly $200 billion in tariff revenue was paid almost entirely inside the US economy," the research indicates. This dynamic challenges the political narrative that tariffs are paid by foreign producers. In practice, U.S. importers pay at the border and then either absorb the costs or pass them on, leading to lower trade volumes rather than cheaper imports.
Economists describe this effect as a slow-moving consumption tax, where costs seep into supply chains over time. While U.S. inflation remained relatively contained at 1.57% (YoY) as of January 2026, studies show only about 20% of tariff costs reached consumer prices within six months. The rest squeezed importer and retailer margins, eroding purchasing power and accumulating pressure quietly.
This environment has directly impacted cryptocurrency markets, which depend on discretionary liquidity to gain momentum. The tariffs have drained excess capital, as consumers pay more and businesses absorb costs, leaving less available for speculative assets like crypto. This helps explain why the market failed to recover its upward trend following the October sell-off, entering a "liquidity plateau" instead of a bear market.
The October downturn flushed leverage and stalled ETF inflows. Under normal conditions, easing inflation might have restarted risk appetite. However, tariffs kept financial conditions quietly tight, inflation stayed above target, and the Federal Reserve remained cautious. Without expanding liquidity, crypto prices moved sideways—experiencing no panic but also lacking the fuel for sustained upside.
Beyond the immediate U.S. context, aggressive tariffs from major economies like the United States, China, and the European Union create widespread global economic uncertainty. This uncertainty ripples into all financial markets, including cryptocurrencies. Tariff announcements often trigger short-term price drops and heightened volatility in major assets like Bitcoin and Ethereum, as investors adopt a risk-off sentiment.
Furthermore, tariffs on imported hardware such as ASIC miners or GPUs increase operational costs for cryptocurrency mining, potentially impacting network economics and decentralization as smaller operations struggle or relocate.
While creating short-term downward pressure, analysts note that persistent trade tensions and economic instability may, in the long term, strengthen the narrative of cryptocurrencies as hedges against traditional market risks and inflation, reinforcing their appeal as alternative stores of value.
