The Realities Of Trump’s Trade War


While VICE is usually nothing more than an extreme left wing propaganda outfit, its look into the ramifications of a trade war is worth watching. They cite the disaster of the Smoot-Hawley Tariff Act that arguably expedited the Great Depression in the 1930s.

Smoot-Hawley Tarrif Act Haunts Trump Tarrifs

In our March 24th, 2018 Volume Is Trump About to Get Crushed? We documented some of the striking similarities:

“…Hoover ran a campaign promising farmers that he would reignite their failing enterprises by increasing tariffs on agricultural products. Hoover won the election in a landslide with Republicans President Hoover taking the House and Senate.

Ignoring a petition from over 1,000 economists warning of the dangers of such a tariff plan, and formal complaint letters from 23 of the United States’ trading partners, Hoover followed through on his campaign promise by enacting the Smoot-Hawley Tariff Act. This was the second highest tariff ever in American history and created a trade war. Within approximately one year, U.S. exports had dropped by nearly half. Within two years, the Great Depression started. Interestingly, both Trump and Hoover were very wealthy businessmen prior to getting into politics…”

Keep in mind, trade and the economies of the 1930s are very different. China was a rural agrarian economy of peasants, a mere afterthought in the 1930s.

China Ready to Deal with Trump

Bloomberg and then CNBC is reporting on a developing story today that could have serious long-term market ramifications. According to CNBC,

“China has offered a six-year boost in imports during its ongoing talks with the U.S.”

So,

“The U.S. had a trade deficit of $323 billion with China in 2018. This deal would aim to reduce that annual trade difference to $0 by 2024, one of the officials told Bloomberg.”

Finally, for all of Trump’s hardline rhetoric when it comes to trade deals, China buying hundreds of billions worth of goods from the United States is good news. It doesn’t mean the U.S. has to stop importing what it needs from China, but that China’s middle class is perhaps finally ready or able to consume more products from the United States and other more developed economies.