Macro Dose - Tariffs, OpenAI, & More
Market Downturn, Impact of Tariffs & More
It’s another busy week, as if market participants haven’t had enough of these already to start the year, as well as the Trump presidency. Crypto faced its largest 24-hour liquidation to date, with over $2.3B being liquidated, and over $188B wiped out in total.
At this time, US indices futures are all deeply negative, and it remains to be seen how much markets could fall at the opening bell, and if we might see another initial overreaction at the start of the week before a recovery, as we did last week.
Being completely tradable 24/7, crypto has already felt the burden of Trump’s tariff threats extensively, with $BTC falling into the $92K range before bouncing to $95.6K, where it sits currently. Meanwhile, $ETH completely erased any progress it had made in reversing the downward trend of the ETH/BTC chart, falling 18%+ at one point, before seeing a much smaller recovery toward just under $2.6K. There are even rumors being spread by some that a trading firm was wiped out by $ETH’s downward move.
As this market downturn is the topic that will be on everyone’s minds, in today’s edition we’ll be discussing tariffs, the cause of this market meltdown, as well as some other important headlines that were overshadowed by Trump’s strong antics over the weekend.
Stay informed, stay alert ⬇
Tariffs Situation
We briefed our premium members on the threat of tariffs in our Weekend Reading newsletter on Saturday. By this time, markets had already reacted negatively to this news, which was announced on Friday, just one day before these tariffs were set to be enacted. However, just as with the DeepSeek situation last week, the weekend would bring crypto down further as this news did not have time to be fully digested by TradFi markets.
It seems the market truly thought that Trump was mostly bluffing when it came to tariffs, that they would mostly be used as a bargaining chip rather than be immediately implemented without consultation with leaders and diplomats beforehand. What also took markets off guard was the fact that Trump has opted to go after allies and the countries closest to the US, and not China, at least not nearly as much.
China has received a 10% tariff, with a loophole of sorts that allowed for small packages being individually shipped to the US to be exempt from import duties also ending. This impacts consumer e-commerce involving clothes and durable goods and goes beyond the standard 10% tariff rate.
Meanwhile, the US moved right to taxing its two largest trading partners, Canada and Mexico, at a 25% rate, with a 10% exclusion for energy. This is notable, as energy makes up the bulk of what Canada actually exports to the US – excluding energy, Canada actually runs an account deficit with the U.S. Prior to these tariffs, there were already discussions of notable food exporters in Canada moving their HQs to the U.S. for ease of business and cost reasons; tariffs will only exacerbate these sorts of movements and make decisions easier.
Trump’s move to immediately tariff these countries demonstrates a couple of key things:
Trump is genuinely serious about tariffs as an income stream to even potentially replace other forms of tax.
Trump is more willing than previously thought to embrace short-term pain for something he sees as beneficial in the long-term.
Today, President Trump is scheduled to meet with the leaders of both Canada and Mexico, which could provide more clarity and finality to this situation, for better or worse. China, Canada, and Mexico combined account for almost half of all U.S. imports, meaning there’s only do much more tariffs that can be enacted on other countries before diminishing returns begin to take effect, which the markets might catch onto.
In The News
Tariffs will no doubt continue to be covered in-depth by legacy financial media this upcoming week. Beyond Tariffs, there are some other important headlines that could impact crypto markets that haven’t gotten their due to the massive liquidation cascade that has just taken place.
OpenAI Deep Research:
Not looking to be one-upped, OpenAI has made strides following DeepSeek’s release of their R1 reasoning model. First, Sam Altman announced that the ChatGPT free tier would have access to the OpenAI O3-mini model. Then, the team introduced Operator & Agents, which would allow users to prompt an operator with tasks involving purchasing, allowing an agent to make purchases on their behalf, leveraging its search and reasoning capabilities. The next iteration of agents has now been released, with Deep Research.
Not to be confused with Deep Research, the AI product feature associated with Google Gemini, OpenAI’s Deep Research goes a step beyond the current capabilities of leading LLM companies. The goal of Deep Research is to allow users to access an agent that is effectively highly-skilled and knowledgable in various white-collar domains. This could range from finance to data analytics; there possibilities could quite literally, be endless.
Notably, Sam Altman declared that Deep Research in its current state can already perform a “single-digit percentage” of all economically valuable tasks in the global economy, referring to white-collar work. This solidifies the notion that in fact, white-collar jobs would be the first to be impacted by AI, rather than those involving manual labor. This development also reflects the need for LLM companies to build a moat via their UI, not their model. Operator and now Deep Research are significant strides in these areas, and it remains to be seen how other companies might react.
As it pertains to crypto; this is obviously good for the AI agents sector, even if the rollout of Deep Research is still in its early stages. This is incredibly important considering the total AI agents marketcap is now just $7.13B, down from a peak of $22B. No matter which way the current tariffs situation unfolds, Deep Research will likely be impactful for AI, markets, and potentially crypto.
India Crypto Review:
This story is much less important but still potentially significant. India, the 3rd largest economy in real terms and the 5th nominally, is reportedly reviewing its current framework on crypto, or lack thereof. In the immediate term, this might not even be a good thing; a 70% tax on undisclosed crypto capital gains was floated, which could be harmful.
However, India's Economic Affairs Secretary Ajay Seth mentioned that the government would be looking into revising its framework, seemingly out of necessity rather than a genuine demand to get involved with crypto. Some smaller countries like El Salvador, and even now the Czech Republic have had favorable thoughts on crypto. India is the elephant in the room when it comes to the largest economies most likely to loosen up on crypto.
Every so often, rumors of China permitting the holding of crypto or loosening up on crypto trading emerge, without much substance. It would obviously be very favorable for crypto if this were to happen but it looks unlikely; India significantly changing its frameworks in regards to crypto is the next best thing.
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