President Donald Trump is taking bold steps to impose widespread tariffs that will impact numerous countries, including Canada, Mexico, and China. This move is reminiscent of the Smoot-Hawley Tariff Act of 1930, which increased U.S. tariffs on over 20,000 imported goods and is often blamed for worsening the Great Depression.
Trump’s plan involves implementing a 25% tariff on imports from Canada and Mexico, and a 10% tariff on goods from China. The President argues that these measures will boost factory jobs, reduce the federal deficit, and lower food prices. However, many economists are skeptical, warning that such tariffs could result in higher consumer prices and ignite potential trade wars.
Trump rightly points out that the U.S. has the largest and strongest economy globally. Therefore, the economic impacts of a trade war will likely hit the rest of the world harder. However, what he may not fully grasp is that the U.S. also has the most over-valued stock market in the world. As a result, the financial losses from this trade war could disproportionately affect the U.S., and sooner than expected.
The timing of these tariffs is significant, coinciding with a record yield-curve inversion. This phenomenon, where short-term interest rates exceed long-term rates, has historically been a reliable indicator of impending recessions. The first notable instance occurred in 1929, just before the Great Depression.
Adding to the complexity, the current economic climate aligns with the 1929-2000 trend line, drawing eerie parallels to past financial crises. The Dow Jones Industrial Average has shown significant fluctuations, reflecting the uncertainty and volatility in the market. This week marked Tech’s first failure at the 50-day moving average since the end of July, signaling potential trouble ahead.
https://x.com/SuburbanDrone/status/1885485952799273288
https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act
https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act
https://www.investopedia.com/terms/s/smoot-hawley-tariff-act.asp
https://dqydj.com/long-run-yield-curve-inversions-illustrated-1871-2018/
https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
https://awealthofcommonsense.com/2016/07/1929-vs-2000/
https://www.marketvolume.com/analysis/stockmarketcrashes.asp
