Donald Trump’s scheme to abolish income tax and tariff would transform the US and world economies by adding an extra charge on imported goods and that all prices on a wide range of consumer goods would start rising. The resulting change in consumer behaviour might be that the initial increase in disposable income from a tariff-free US would be fully offset by the tariff hike, as US consumers began to cut back on spending. There could be a revival in manufacturing and in industry itself as US companies tried to avoid the tariffs by moving production back to the US.
What would this mean for bitcoin? For consumer spending? In an environment of higher incomes and prices, Americans might save more and invest, including in bitcoin – seen as a safer store of value against the backdrop of higher prices and economic uncertainty. In the short term, bitcoin could see a price spike, as we did during the COVID-19-era boom in stimulus-fuelled markets. But in the longer term, a shift in consumer time preference towards longer-term financial planning and saving should stabilise demand as US domestic production picks up and economic stability returns.
Overall, replacing income tax with tariffs could, in turn, induce broad shifts in consumption and investment patterns and the economic order as a whole. If reshoring of production increases domestic employment and economic growth, shifting financial priorities could drive greater demand for bitcoin as a secure store of value. The financial reorientation would alter the framework for personal and national finance and could elevate bitcoin to a dominant position, particularly if the US public sees it as a way to maintain the ability to buy things even as the value of the fiat currency declines and inflation increases.
Source: Forbes
