The trade tensions are escalating—Europe is now sounding the alarm over what could become a dangerous deflationary cycle following Trump's tariff threats. When major economies enter into tit-for-tat trade wars, the ripple effects hit everything from traditional markets to risk assets like crypto.

Here's what's happening: retaliatory tariffs and trade barriers tend to trigger a negative feedback loop. Higher import costs fuel inflation initially, but protectionist measures eventually choke off growth and demand. For investors, this kind of macro headwind typically forces a risk-off environment where capital flows toward safe havens rather than speculative plays.

What makes this cycle "dangerous" is the timing. Global economic growth is already fragile, and geopolitical friction only accelerates the downturn. When traditional markets get spooked by policy uncertainty and recessionary signals, crypto often follows—though some argue Bitcoin's role as a hedge asset could shine in longer-term instability scenarios.

The bottom line: watch how central banks respond. If they ease aggressively to counter the slowdown, that's actually bullish for alternative assets down the line. But in the near term, expect heightened volatility across all markets.