Tariffs, Recession, Stock Market Decline
When Trump threatens tariffs the stock market tanks
First 50 Days of Trump Presidency Defined by Tariff Policy, Talk of a Recession, and Yuge Stock Market Decline
During Trump’s first term as President, tariffs were more focused, not as extreme, and there wasn’t the insistence on them as there is this time so early in his Presidency. Many Trump supporters didn’t think he would follow through like he has, but Trump has been a fan of tariffs dating back to the 1980’s.
Donald J. Trump lost an auction in 1988 for a 58-key piano used in the classic film “Casablanca” to a Japanese trading company representing a collector. While he brushed off being outbid, it was a firsthand reminder of Japan’s growing wealth, and the following year, Mr. Trump went on television to call for a 15 percent to 20 percent tax on imports from Japan.
“I believe very strongly in tariffs,” Mr. Trump, at the time a Manhattan real estate developer with fledgling political instincts, told the journalist Diane Sawyer, before criticizing Japan, West Germany, Saudi Arabia and South Korea for their trade practices. “America is being ripped off,” he said. “We’re a debtor nation, and we have to tax, we have to tariff, we have to protect this country.”
Of course, you may remember that the Japanese economy of the 1990’s is not considered a success story and is often referred to as the “Lost Decade.”
Bloomberg.com is keeping a list of Trump’s tariff threats. In the past few days, Trump was forced to back down (at least temporarily) on Canadian tariffs after the Ontario Premier threatened to shut off electricity to the United States.
Trump declined to state the country was not headed into a recession when asked about it by Fox News.
It is no wonder the stock market hasn’t performed this bad in the first 50 days of a Presidential administration since 2009 when Obama first became President.
The Wall Street Journal Editorial Board said it best with their editorial on Wednesday.
The trouble with trade wars is that once they begin they can quickly escalate and get out of control. All the more so when politicians are nearing an election campaign, as Canada now is. Or when Mr. Trump behaves as if his manhood is implicated because a foreign nation won’t take his nasty border taxes lying down.
We said from the beginning that this North American trade war is the dumbest in history, and we were being kind.
Ronald Reagan discussed the problems tariffs cause to a nation. They stifle competition and shrink and collapse markets. Just look at the Smoot Hawley Tariff Act which prolonged the Great Depression.
Reagan wasn’t always good on trade policy, but he generally got it right.
Trump didn’t watch enough Ferris Bueller’s Day Off during the 80’s:
Tariffs are taxes passed on to the consumer who benefit from foreign goods, foods, etc. This leaves them with less money to spend and therefore hurts their quality of life. The federal government collects the money as a form of a tax. Additionally, other countries respond with their own tariffs which increase prices for their consumers which hurts our exports and our domestic businesses.
One of the greatest factors in the economic growth of America has been that we mostly have had a free trade policy. We have it domestically with interstate free trade. One of the major problems with the Articles of Confederation (what we had before the Constitution) was that states were engaging in trade wars with other states. We could imagine the chaos if that happened today.
Shutting down trade will be a disaster for American consumers and manufacturers. Even if your business is one that is protected, you will stiff suffer from the economic disaster these policies cause. Just look at your 401k plan and your grocery bill.
Just because other countries want to shoot their economies in the foot doesn’t mean we should.
Trump believes in his tariff policies despite the economic consequences. He talks about how rich they will make us, but it is a tax that will be paid by American consumers. He is doubling down. After all, he doesn’t need to keep his voters happy as he can’t run for re-election. He campaigned on tariffs and now we get to see the disastrous results that tariffs, and trade wars have on Americans.
He says the tariff policies will be the greatest thing in American history, but let’s hope it isn’t as great as the Great Depression when Hoover tried this same stunt.
How Have History’s Trade Wars Played Out: