How Tariffs, Triffin, and Trump Could Send Bitcoin to New Heights

banket Nation Terrace triffin and Trump how the endgame sends Bitcoin vertical this is the title of a short article written by Jeff Park who is the head of alpha strategies from our friends over at bitwise Jeff thinks that the incentives and actions of Donald Trump and his administration is creating one of the biggest intersections with crypto and the macro markets that we've ever seen even greater than Co we're recording this episode on the back of Trump's 25 % tariffs on Canada and Mexico and 10% tariffs on China Jeff

thinks that this is just the beginning not necessarily with just tariffs but of what Jeff thinks is The Logical conclusion of United States monetary and fiscal policy which he thinks is extremely low 10-year yields and a devalued dollar both things which materially favor Bitcoin and risk assets I'll let Jeff explain it himself right after we talked to some of these fantastic sponsors that make the show possible with over $1.5 billion in tvl the me prot call is home to me the fourth largest eth liquid staking token offering one of the highest aprs among

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bitwise Jeff welcome to the podcast happy to be here David thanks for having me Jeff as you know Fe on February 1 Donald Trump announced 25% tariffs on imports from Canada and Mexico this sent stocks tumbling on Monday but things have seemingly recovered on the news that these tariffs are being paused after both Mexico and Canada expressed desire in negotiating with Donald Trump yesterday Jeff you wrote this article tit titled tariffs triffin and Trump how the endgame sends Bitcoin vertical uh Jeff really high level how do and what

do the Trump tariffs have to do with Bitcoin how are these two ideas connected absolutely they're connected at a very intuitive sense the first is tariffs create chaos and chaos is not loved by markets and so while we think that for the short-term sentiment risk could feel off the reality is Bitcoin th in chaos because chaos is actually the moment for which Bitcoin shrines in the certainty that we know for the role that it can serve as a place of stability and

so that's one the other thing is ultimately tariffs no matter how you think what the end game may be whether it's actually temporary or whether it's permanent the reality is it will create further fiscal deficits both on the imposing and the imposed and when you connect the dots there we know Bitcoin is the ultimate trade to head for future debasement and tariffs are going to accelerate it and so both of these arrows ultimately point to bitcoin at the center for which the upward trend is higher okay fiscal deficit I'm just

going to ask some real one-on-one questions why does a fiscal deficit benefit Bitcoin and why does the recent news of the Trump tariffs uh why does that imply that we're going to go into a fiscal deficit sure so fiscal deficit is a way to gauge the creditworthiness of a sovereign backer right and so when you think about the us having mint uh grade uh credit rating it's because people believe the US will pay its debt back uh now that has some implications about

having sound fiscal budget policies and the ways that you're managing the duration of the forward pooling of the borrowing in a timely and sensitive way but if you don't actually think the fiscal deficit is being managed you get downgraded and that's actually what you've seen recently with France having been downgraded uh you are seeing some other um Asian countries being downgraded and the US has now come into the dialogue of whether these ratings have gone to negative outlooks from stable outlooks to the um fiscal

crisises that we've experienced in the past as well and so they are related and in that sense Bitcoin has been the trade in how people thought of is uh removing yourself from the system of the global monetary design uh in fact we talk about Bitcoin time highs dollar denominated As Americans which we're very privileged by but the reality is we hit Bitcoin alltime highs in almost every other currency in the world last year and so while we are kind of anchored to this 100K level that 100K is an American number it's actually through the roof everywhere else because dollar strength

has been incredible over the last year so this is all part of the relation to how Bitcoin is actually the base pair for most people not the US Dollars and how they think about wealth preservation so uh ultimately tariffs are creating deficits because because uh at the core of it tariffs are wasteful tariffs are economically wasteful this is uh the reality in which you're introducing friction in the abilities for markets to function and that is going to create some Financial waste now people also conflate wasteful

to mean not useful but that is not true and that's actually where I think the lens to tariffs being useful is a powerful thing and it's not about the deficit at that point anymore it's about National Security and other priorities that may have that have non-economic values that you have to assign some utility for um but the reason that tariffs are ultimately going to create fiscal deficit issues is is is for instance in the US if these tariffs are permanent it is very likely that there will be inflation and prices will go higher uh and in general the way to offset that is actually you would have

to provide it with a tax cut that tax cut in effect also can be a counteract to the dollar strengthening by the imposition of tariffs where the rising budget deficit lessens the creditworthiness that you and I just talked about where therefore American dollars may not actually be as trust trusted and so in a very perverse way actually the way you think about lowering the dollar is by spending more uh and that's why ultimately these things are tied together um and part of

the solution here is that you're widening the deficit in some sense to uh do that tax cuts would be a big portion of it in your article Jeff you wrote um recognize that tariffs are an often a temporary negotiation tool to achieve a goal the ultimate goal is to seek a multilateral agreement to weaken the dollar essentially a plaza Accord 2.0 can you explain U Plaza Accord 2.0 what what's the first plaza Accord what's Plaza Accord 1.0 and what does it mean to have a plaza Accord 2.0 and why do we want that sure so most of the monetary

system as you and I Know It And the current generation has been a world in which the dollar has been backed by the words of the US government I.E there is actually no hard collateral but that's not true for most of human history and actually most of the greenback's history so we have to start our Journey in 1970 1971 when the collapse of Bret and woods kicked off this movement the Breton wood system uh collapsing meant that ultimately the dollar would no longer be pegged by gold at the time it was pegged at $35 per ounce once that became free

floating uh that's when currencies started to have to pair their reference straight to other currencies um by the way the reason ultimately why the dollar had to be dep pegged from gold is the trifin Dilemma in itself which is that there's a conflicting role if one's National currency also serves a role of being an asset as a global reserve for foreign countries too so back then there was a lot of demand for dollars because

dollars was the thing that was used for trade so to get more dollars out there you actually have to go into deficit uh there's no other way you got to print the dollars what the problem now is well do you have enough gold to back that dollar and now you can already see it like the structural need for the dollar for trade is not matching actually the fundamental valuation of the dollar being backed by hard collateral and so when Breton Woods collapses essentially the dollar weakens and we enter a period of heavy turmoil and what happens is the

emergence of the us as an exceptionally powerful country country in which the dollar does become this Reserve asset that people still want to hold on to and the dollar strengthens incredibly uh regardless of whether it's backed by gold and this is an incredible social experiment but one in which the US emerges as a winner or so you think in the 80s the biggest threat for the US economy is actually Japan and Japan at its Glory of being an export driven economy was extremely competitive

with the technological might that they were developing and able to export more cheaply as a dollar was strengthening and so the biggest concern in the 1980s was actually not that dissimilar from the concerns that we are hearing about today in 2025 which is how do we onshore us capabilities to compete in the National and international stage and you just have to replace Japan with another Asian country today which is China and that's basically the case for the plaza CT 2.0 so what happened in Plaza cord

1.0 is essentially all the countries got together Japan included and there was a negotiated multilateral agreement that we would actually find the path to devalue the dollar and the biggest counterparty that would be at risk to this would have been Japan and you had to therefore Wrangle the motion in getting them to acques to these demands and you can now get a sense for how strategic these conversations are how delicate and meticulous they are in the complexity of trading Partnerships and one that requires uh a little bit of

wisdom Beyond just following textbook models that you learn in macroeconomics 101 and what now the case for the dollar strengthening the case for the dollar uh as a result making it challenging for us to onshore their economy in the manufacturing uh an industrial capacity we might want to participate is ex is extremely similar to uh to 1985 and then how did the the Trump tariffs on Canada and Mexico suit uh this end like how did do the the tariffs

actually relate to a plaza Accord 2.0 there are a few people who believe these tariffs might be a permanent fixture of the economic landscape going forward I tend to believe that uh it is more of a tool for negotiating at this moment in time to seek other concessions that will exert military and economic might onto other countries in the future from the US's perspective um and so without deciding what you think those tariffs represent today you can can actually have a lot of different conversations

about the end game uh and its impact uh I think Trump is extremely sincere about several things but the thing that is most sincere is uh he does want to bring back some of the exported capacity of American uh manufacturing and Industrial sector home he wants to bring jobs home yeah he does want to bring jobs home it's why he's in office a big ch of his constituents are reversing the

globalization movement and so this is I think something that he do he does mean sincerely wants to happen now the reality is as we've said tariffs are wasteful uh and there are things that are beneficial to having comparative advantages where you can specialize uh and trade and do things in a way that is more Capital efficient um but it's also possible that the era that we're entering is one that is not driven by that shared Vision right and that fracture is real and the and the and the

and the multi-polar powers emerging through Russia and China is actually real and so in that sense you might have to give some room to the reality that tariffs might be a fixture uh in in in a permanent way but it's also very bad for markets if that's the case and the other thing Trump really cares about is actually the markets he's very very honest when he tells you that he looks at the stock market every day and he just wants to see it go up and so when you just zoom out know nothing about tariffs and you just know those two

things uh I think you'll hopefully come to the same conclusion that this is just a negotiating tool which is I think what you saw in the past few days you've seen him kind of backplay a little bit and just test the water on how aggressive are my trading partners coming back at me and even yesterday you know the demands that China has made on the back of the 10% tariff that Trump had imposed you could already sense that China is behaving much more uh carefully than they were eight8 years ago uh in the

ways that their demands are actually not uh equal in the push back and they're acquiescing a little bit to the might of the US interesting okay so the the news that came out um on Monday was that Trump is imposing all these tariffs or maybe it was on Friday um the market responded on Monday and also Mexico and Canada also responded on Monday uh as the news today is that the tariffs on Mexico and Canada are being delayed paused for 30 days uh because my sense is is that Trump is getting some uh

winning some negotiations with Canada and Mexico they have both said that they're going to like send troops to the Border uh I don't know if we the United States TR Donald Trump is getting everything that he wants but he has paused tariffs for 30 days um and then you also indicated that China is also being a little bit more flexible and willing to negotiate with Donald Trump more on on his terms why is now different than we did this we did this last time Trump was President eight years ago as you alluded to we did this whole trade War thing uh what what's different now that pos position United

States in a position of strength more than eight years ago or is that not the case I think what's different now is the picture has become clear in the direction and the Tailwind of the mood of the world which is that when eight years ago Trump came to office it was still a little bit of a dark period as to the questions it raised around the acceptability of that movement but since then you've actually seen the world go into more anarchic chaos with all the ways that power is being battled across multiple Arenas and you are seeing the

rise of more protectionist oriented uh world leaders out there and so Trump today fits more of like the mainstream era than once upon a time eight years ago where he might have looked a little bit more like an Icona class right because you have to put this in the context of then brexit and all these other things that had unfolded since where now it's been normalized that this is the direction of the world and here's the beautiful thing about trade trade has to be multilateral right you actually cannot make any Global monetary

design uh Solutions without there being bought in uh Co cooperation and so that directive I think has become especially more clear now more than ever the second thing is I think China today is in a much weaker position than it was uh seven eight years ago some of of this is on the backlash postco but the other fact is China domestically is actually experiencing a serious financial crisis on the back of their housing sector and

so the challenge with uh she being able to navigate this internally is a little bit more in the benefit of the US to potentially exert more influence than it was able to do uh 70 years ago so where do you think we've landed with this tariff conversation uh like I said Trump tried to impose these 25% he's positive for 30 days but China or excuse me Canada and Mexico have played nice as you said uh China is a little bit more um uh me amable to United States because

they're in a weaker position where do you think this goes from here what would do you think is the next step in this like a tariff game yeah so I think the next game is and it's not going to be tomorrow it's not going to be next week but I do think there is going to be a globally coordinated Plaza Accord 2.0 type of event that's what next okay yeah because the reality is the dollar is too strong and tariffs will actually uh strengthen the dollar as well and uh that is not the outcome that Trump actually would like to seek and so the

way that I'm imagining this could happen is you have to have a new um rejiggering of that uh social contract and the social contract changes to this you basically get China and Japan and other of your trade Partners to invest more in longdd American bonds and essentially play a little bit of the factoring game on the back of that duration being a lot more uh powerful than the short end per

dollar basis right so like the the reality is a lot of the US treasuries financing program over the last four years changed to be short-term oriented meaning t- bills are actually a big focus of how the US is now funding itself but that's actually a pretty dangerous place to be because you're at the whims of repricing every few years and you haven't been able to actually secure long duration uh dvo1 there and you also need more dollars right because you have to keep turning those portfolios so the refinancing velocity

means there's just constantly more dollars being used for that now imagine if you could term that out for like 30 plus maybe a hundred years just term it out then you actually don't need those dollars and the number one thing that we're all trying to is how do you get the dollar lower how do you make these countries not hold dollars as a reserve asset and one way to do that is yield curve control right and that's why I think this idea of like yield curve control but not yield curve control is becoming more topically entered into the mainstream mindset uh because liquidity

is actually a funny thing a dollar today and a dollar 10 years from now is still $1 but the velocity of how much you need to turn that dollar over is different and that's actually the difference between the dollar strength and uh the long-term uh yield strength as well you said in your article I have shared before that Trump's number one goal is to lower the 10-year yield rate the reason being that his own bags depend on it real estate can you expand on this as it relat yield C yield curve control

without actually being yield curve control uh what does he what does it mean that to to lower the 10-year rate and why does it um align with Trump's bags real estate yeah this goes back to one of the most uh I think uh perhaps admirable quality of trump if there was one thing you can call that as admirable is that he is blatantly and bluntly honest about what he wants uh now that Honesty also has translated into the fact that he's an extremely self-interested person I might

argue most people are self-interested and Trump is not ashamed to admit it and so he has actually given you the blueprint in telling you exactly what wants to accomplish and the things that all of us can benefit from is to be on the same side of the trade of the president and his biggest backs without a doubt is commercial real estate and he's been wanting to lower rates forever you've seen the rhetoric come out when he even challenged

Powell's uh credibility to remain neutral against influences and you've seen how much he inserted himself into that convers ation and made himself known that he will do things outside the general Norm of the office to to do such things what I think is really interesting though is last week Trump actually applauded Powell for not lowering rates which is actually kind of paradoxical because you would have thought he would have gone on a rampage

like weat about like oh this guy gotta get him out of the office he's not doing what he wants Americans are suffering no actually he's he pled Powell so why did he do that I think it's because he he knows Powell actually can't influence the long-term rates and that's what you saw in November last year and December where as rates were coming in the 10e didn't come in at all in fact it went the other direction it blew up and the term premium expanded so I think what Trump has realized is actually the FED

cannot control the front end and Powell doesn't have any credibility to influence the long end of the curve which is why he now knows he must use the power of the executive branch to carve out his own path to control for that 10e rate which I think is tarriffs in the way that he's navigating this journey um and the re is this related to what Lyn nden calls fiscal dominance where it's actually the government that is really in control of and it's fiscal policy that is in control of monetary policy and not the other way around yeah

it is it is the reality that the fed and and the treasury work together to enact one agenda for American Dollar and foreign uh policy and the reason is because the FED can only truly control the front end of the curve but the back end of the curve is actually controlled by the treasury because they manage the issuance calendar and the maturity schedule of the bonds to which they seek their trade partners and so even though we're all taught in school and the

General Media that the FED is an independent Act and that they only care about two things unemployment rate and inflation the reality is these things are all intertwined uh and it goes back to again the trifen Dilemma because if the conflict is that the currency which is serving your domestic goals is is directly competing with your International goals of your trade balances how could it be possible to have a Fed that only cares about

domestic policies it just can be can you explain that a little bit more let's so let's go back to the to the triffin Dilemma The triffin Dilemma is that uh the United States has its own National currency it also happens to be that that National currency is the global Reserve currency and the countries of the world need to receive the currency in order to do any sort of trade either between them and United States or between them and other other countries as well and so there's this always persistent demand for dollars to be able to go export to

the rest of the world world so the rest of the world can trade amongst themselves and so there's this net outflow of dollars which is what we call a deficit and what that's created is that it's actually like hollowed out internal manufacturing because we are printing money and sending it overseas we're getting things back we're getting cars back we're getting products back things that are made in America but it's actually cheaper for us to get it abroad because we have this trade deficit we have to outflow the money and so we get things it's like this exorbitant American privilege we get things on the

cheap and that Hollows out like local American manufacturing because it has to compete with this outflow of money uh and these these like and this where what did this hollow out like Pennsylvania all the manufacturing states that were blue that flipped red when Trump was elected in the first place and so this is the triffin dilemma and the triffin Dilemma connect for me how it relates back to the yield and the value of the dollar and how that aligns with Trump's interest on uh lowering the 10-year

yield in his his real estate bags yeah so it's related because ultimately the exorbitant privilege is that the US gets to borrow longterm for very cheap and uh in a way we all benefit from that it's actually what anchors the US housing market for example when we all take out our mortgages the ability for Americans to have those types of financial access is funded by our foreign creditors uh but as a result you've described exactly the offsetting side which is that it creates the

capital flows in a way that strengthens the dollar and this is often called the twin deficit which is the budget deficit in itself now being related to the trade deficit uh and and that is actually the core of the problem the dollar is too strong this is why there was a plaza Accord 1.0 and that's why we need another Plaza Accord 2.0 uh and there will be details about that's different but the goal is to to lower the dollar to restore the competitive strength and how Americans can actually be an export economy

uh I think the perverseness of all of this is that um you you almost want to self-sabotage your own fiscal uh credit to try to get people to not want to have the us as the reserve asset right dollars as a reserve asset uh because today actually the dollar is in a really interesting Crossroads on one hand it's been visible that uh dollars are growing as a percentage of foreign Holdings as a

reserve asset but it's actually been declining as the medium of choice in settling trade and uh International Financial transactions which is actually a little bit paradoxical too you almost want the opposite you want people to use the dollar for trade but you don't want them to hold it uh and hoard it creating it to go up uh and this is uh one way that I also think that stable coins has to be a relevant portion of that conversation and I suspect a lot of this conversation

will ultimately um go towards the management of the yield curve that is then going to be offered to back such an asset as a stable coin are you ready to swap smarter Unis swap apps are simple secure and seamless tools that crypto users trust the Unis swap protocol has processed more than $2.5 trillion in alltime swap volume proving it's the go-to liquidity hub for swaps with support for growing numbers of chains including ethereum main net bass Arbitron polygon ZK sync Unis swap apps are built for a multi-chain world Unis

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erc20 tokens like usdt and usdc and send crypto to phone numbers in seconds but why should you care about cell's transition to a layer 2 layer 2's unify ethereum l1's fragmented by becoming a layer 2 cell leads the way for other evm compatible layer ones to follow follow cell on X and witness the great cell happening where cell Cuts its inflation in half as it its layer 2 era and continuing its environmental leadership well one of the last lines in your bit we've talked about this briefly uh never doubt the uncomplicated incentives of the transparently profit motive

motivated and align yourself next to him you're talking about Trump of course we talked about this um but you're the punchline you're really getting to is how Bitcoin is a vehicle to align yourself with the incentives of trump maybe you can connect that those two bits out of all of this everything we've been talking about so far how does this impact Bitcoin yeah so many people today are concerned about the pth dependencies and the second and third or effects of what these tariffs are going to do and how China is going to respond and yada yada y we don't know none of us can know but actually what's really easy is

solving it backwards by knowing what the end game is and the endgame as I've described and as you've outlined here is that Trump wants one thing to protect his own bags which is lower 10year rates and that is nakedly obvious in front of anyone who can understand what his uh what he's doing and so actually if you know that's the end game it's a little bit easier to solve backwards as to kind of putting things in motion to get to that end conclusion so if you take for granted that then the ten year is going to compress two things are going to

happen one risk capital in the US will be on fire again because there's now a wall of cash coming back into the market with the old lower that's going to be chasing risk it's going to be great for the stock market it's going to be great for Bitcoin and and if you actually thought tariffs were permanent you will know there's going to be a large income tax cut associated with that unfortunately uh income tax as a as a tool is regressive in nature right where the removal of it actually then creates

more abundance of wealth at the top which is more Capital then that is going to seek risk so there's actually a profound effect on risk Capital if you thought an income tax uh would be would be repealed so that is incredibly good for Bitcoin uh but the other side of it is if you're not an American and you're on the other side of that equation where you are suffering on the back of these tariffs you're basically sitting at home looking at TV and realizing your elected leaders completely failed you and now