Friday, June 8, 2018

Quote (and Chart) of the Day: History's Frightening Account of Tariffs

In its "Investors' Corner" article this afternoon Investors Business Daily reminds us of the history of the U.S.'s most infamous act of protectionism:
May 28, 1929: House passes Smoot-Hawley legislation, but it's not clear that it will become law.
Oct. 21, 1929: Senate rejects move to limit tariffs to agriculture.
Oct. 28, 1929: A delegation of senators urges Hoover to push through the tariffs. Hoover agrees.
I'd be the first to point out that the Great Depression was about more than the horribly ill-conceived and utterly ignorant ambitions of Messrs Smoot and Hawly, but still: 

Here's the Dow (% change) from the day the tariff legislation was passed (apparently the President couldn't act alone in those days) through the day Hoover gave the nod:   click to enlarge

Clearly, the traders/investors of the late 1920s expected economic logic to prevail (per the following), until, alas, it didn't.
May 4, 1930: 1,028 economists warn Hoover against tariffs.
Well, 🙏: 
May 3 of this year, 1,140 economists echoed history when they warned Trump not to take the tariff path.
While general conditions in the late '20s were ripe for recession, and, thus, a whale of a bear market was already in the cards, surely the present powers that be will pay heed to history, if not the warnings from today's economic community -- as the tariff scheme was unquestionably the straw that broke the already wounded market's back!

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