Crypto Recovers After Trump Delays Trade Tariffs on Canada and Mexico

Trump’s tariff pause led to a much needed crypto market recovery. The US President also signed an executive order exploring a US sovereign wealth fund. This started speculation about potential Bitcoin investments, especially after a social media post from Senator Cynthia Lummis. Additionally, Treasury Secretary Scott Bessent was appointed acting director of the CFPB after Trump removed Rohit Chopra. For now, the reasons behind Bessent’s temporary leadership of the CFPB is still unclear. Trump now has a number of his preferred candidates leading major US financial regulatory bodies.

Trump Pauses Tariffs on Canada and Mexico

The cryptocurrency market experienced a sharp rebound after an announcement by US President Donald Trump that proposed tariffs on Canada and Mexico would be temporarily paused. The move came after discussions with Canadian Prime Minister Justin Trudeau, who confirmed in a statement on X that the 25% tariffs will be on hold for at least 30 days. 

Trudeau also shared Canada’s plans to improve cooperation with the United States by implementing a $1.3 billion border security plan, which includes the appointment of a Fentanyl czar, classifying cartels as terrorist organizations, and reinforcing the US-Canada border with helicopters and more personnel.

Mexico’s tariffs have also been delayed for a month. Mexican President Claudia Sheinbaum stated that both governments reached a series of agreements, including reinforcing the shared land border while simultaneously working on trade and security concerns. Despite the pause, Trump told Bloomberg TV that negotiations are still ongoing and tariffs could still be imposed if agreements were not finalized.

Meanwhile, the executive order issued on Feb. 1 that imposed tariffs on Mexico and Canada also included a 10% tariff on China, which is still in effect. A Wall Street Journal report suggested that China’s government is willing to negotiate, with its initial proposal reportedly centered on restoring the Phase 1 trade deal from 2020. This trade deal committed Beijing to increasing its purchases of US exports by $200 billion over two years.

On the crypto-based prediction market Polymarket, traders placed odds of 24% that Trump will completely remove the tariff on Mexico before March and a 21% chance that Canada’s tariffs will be revoked. China, however, has only a 7% probability of seeing its tariffs lifted next month.

Mexico tariff removal odds (Source: Polymarket)

The crypto market saw very large losses just a day before, when Trump first announced the proposed tariffs on goods from China, Mexico, and Canada. In fact, the announcement led to an estimated $10 billion worth of liquidations. 

However, after the announcements from world leaders regarding the tariff pause, the market was able to recover. Bitcoin surged past the $100,000 mark, reaching $101,007 after plummeting to a low of $92,000 the previous day, according to CoinMarketCap. Ethereum also saw a bounce to $2,809 after dropping to $2,451 on Feb. 2. The Crypto Fear & Greed Index reflected this shift in sentiment by moving into the “greed” territory with a score of 72.

Trump’s Sovereign Wealth Fund Sparks Bitcoin Speculation

President Donald Trump also recently signed an executive order directing the government to explore the creation of a sovereign wealth fund. Naturally, this move sparked speculation about potential Bitcoin investments by the US government. 

During a press event in the Oval Office on Feb. 3, Trump tasked Treasury Secretary Scott Bessent and Secretary of Commerce Howard Lutnick with starting the process, and stated that the fund will aim to “monetize the asset side of the US balance sheet.” Bessent confirmed that the executive order will be enacted within the next 12 months.

Trump signing EOs in the Oval Office

While Trump and his officials did not explicitly mention cryptocurrencies as part of the fund’s investment strategy, they suggested the government could buy TikTok, which is still under a lot of pressure due to a law requiring its parent company, ByteDance, to divest its US operations or face a potential ban.

However, speculation around Bitcoin involvement heated up after Wyoming Senator Cynthia Lummis hinted on social media that the sovereign wealth fund could be used to buy BTC. Bitcoin advocate Wayne Vaughan also suggested that Bessent and Lutnick might consider allocating part of the fund to crypto.

So far, Trump’s executive orders have faced very quick legal challenges since he took office on Jan 20. Some of his actions have already been blocked by courts, including an order trying to revoke birthright citizenship, which a federal judge deemed unconstitutional. His recent executive actions on cryptocurrency have also stirred some debate. On Jan. 23, Trump signed an order establishing a crypto working group while banning the development of a US central bank digital currency (CBDC), though legal experts have questioned the enforceability of this.

Trump Appoints Treasury Secretary as CFPB Acting Head

US Treasury Secretary Scott Bessent, who was confirmed by the Senate less than a week ago, will also serve as the acting director of the Consumer Financial Protection Bureau (CFPB) after an order from President Donald Trump. The decision was made after Trump removed former CFPB Director Rohit Chopra, who had urged his successor to continue investigations into Big Tech and Wall Street firms. The reason behind Bessent’s temporary leadership of the CFPB is still unclear. This is especially interesting as he just took on the role of overseeing one of the country’s largest financial departments.

Statement from the CFPB

Before his confirmation, Bessent aligned himself with the administration’s stance on financial regulations, including opposing the creation of a US central bank digital currency. The Trump administration has been reportedly looking for ways to limit the regulatory reach of agencies overseeing banks, and Tesla CEO and unofficial presidential adviser Elon Musk advocated for the elimination of the CFPB altogether. 

Additionally, Trump signed an executive order on Jan. 20 instructing all government agencies to pause proposed rules. This directive could greatly impact regulators like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the CFPB.

With Chopra’s removal, Trump now has several of his preferred candidates leading major US financial regulatory bodies. SEC Commissioner Mark Uyeda is currently acting chair while the Senate considers Trump’s nomination of Paul Atkins for the role. CFTC Commissioner Caroline Pham also replaced Rostin Behnam as acting chair on the day of Trump’s inauguration.

The CFPB is currently facing legal challenges over its regulatory authority. Technology trade groups TechNet and NetChoice filed a lawsuit against the bureau’s rule that seeks to regulate payment apps and digital wallets in the same way as traditional banks. The rule was finalized in November of 2024, and it seems to exclude crypto wallets and only applies to transactions that are conducted in US dollars.