President Donald Trump is making bold moves to impose sweeping tariffs on numerous countries, including Canada, Mexico, and China. This ambitious plan is reminiscent of the Smoot-Hawley Tariff Act of 1930, which significantly raised U.S. tariffs on imported goods and is often cited as worsening the Great Depression.
Trump’s strategy involves 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. Many supporters believe these tariffs are essential for protecting American industries and ensuring fair trade practices.
Trump correctly 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 realize 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 more imminently.
The timing of these tariffs is notable, 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, with the first notable instance occurring 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
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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
