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TomCADem

(17,390 posts) Fri Apr 6, 2018, 08:25 PM Apr 2018

Dow falls 572 points as Donald Trump and China issue fresh tariff threats as trade war looms

Source: USA Today

Blame "Tariff Tantrum 2.0" for the latest stock market swoon.

U.S. stocks closed sharply lower Friday as Wall Street reacted to the latest escalation in the trade fight between the U.S. and China.

Investor jitters were elevated on the final trading day of the week after Beijing vowed to fight back against the Trump administration’s latest threats of yet more tariffs on Chinese imports, renewing investor fears that the brewing battle between the world’s two biggest economies could result in a full-fledged trade war.

"Escalation of the U.S.-China dispute has entered a new phase," David Fernandez of Barclays Bank in Singapore told clients in a report.

Read more: https://www.usatoday.com/story/money/markets/2018/04/06/stocks-trump-threat/492341002/

I do not know why the corporate media says that protectionist tariffs are leftist Democratic policy staple. Pro-Business Republican Herbert Hoover pushed for the Smoot-Hawley Tariff Act. The year was 1929. President Herbert Hoover was about to be inaugurated, and the U.S. economy was doing really well. Employers were hiring. The unemployment rate was very low. There was no Great Depression in sight whatsoever. Yet, to juice the economy further, Hoover supported the Smoot-Hawley Tariff Act.

Progressive icon FDR, on the other hand, supported the Reciprocal Trade Agreements Act, a truly globalist piece of legislation, which allowed the President to enter into trade agreements and lower tariffs.

Fast forward today. The U.S. economy was doing really well. Employers were hiring. The unemployment rate was very low. There is no repression in sight, and it is Donald Trump who is refusing to enter into trade agreements like the TPP, threatening existing ones like NAFTA, and increasing tariffs against other countries.

19 replies

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Dow falls 572 points as Donald Trump and China issue fresh tariff threats as trade war looms (Original Post) TomCADem Apr 2018 OP

Trade issues did not cause the depression wasupaloopa Apr 2018 #1

And the republicans want to open that up again. dhol82 Apr 2018 #3

No. Trade barriers turned small depression into a Great Depression. Also, today trade more important Bernardo de La Paz Apr 2018 #4

Government spending by the Roosevelt administration began to turn the depression around yet FDR wasupaloopa Apr 2018 #14

Govt spending was key but it had to battle the drop in trade. RepubliCons not in mood for govt spend Bernardo de La Paz Apr 2018 #18

Thank you for that injection of reality Farmer-Rick Apr 2018 #5

The cause of crashes is not capitalism. Bernardo de La Paz Apr 2018 #9

Well, even by your own admission Farmer-Rick Apr 2018 #10

Not my "own admission". No system is perfect, but we are getting better at regulating. Bernardo de La Paz Apr 2018 #13

Yes. It seems that crashes are caused by people -- or groups of people -- of influence who KPN Apr 2018 #15

I agree with your well-written statement of the issues. . . . nt Bernardo de La Paz Apr 2018 #19

Trumpism depends on a sole winner. gordianot Apr 2018 #2

BINGO! KPN Apr 2018 #16

Found among the rubble CountAllVotes Apr 2018 #6

Kinda gives the impression Trump sucks at business. Beartracks Apr 2018 #7

7 or ... CountAllVotes Apr 2018 #8

Was he really elected? Farmer-Rick Apr 2018 #12

I think Putin's puppet is intentionally doing this to manipulate the stock market. olddad56 Apr 2018 #11

I think it's more like he just loves exercising power. Regardless of it's outcome, KPN Apr 2018 #17

wasupaloopa

(4,516 posts)

1. Trade issues did not cause the depression

Reply to TomCADem (Original post)

Fri Apr 6, 2018, 08:31 PM

Apr 2018

Using debt to invest was the biggest culprit.

Investors could not meet their margin calls.

They had to sell at a loss and that snowballed

Banks failed because loans could not be paid back.

Savings were wiped out.

Interest only loans were called and borrowers could not make principle payments and lost their homes.

Cash was scarce and business could not remain open.

None of this had to do with trade.

dhol82

(9,353 posts)

3. And the republicans want to open that up again.

Reply to wasupaloopa (Reply #1)

Fri Apr 6, 2018, 08:35 PM

Apr 2018

Lots of whispers of economic meltdown to come with destruction of all regulations.

Bernardo de La Paz

(49,027 posts)

4. No. Trade barriers turned small depression into a Great Depression. Also, today trade more important

Reply to wasupaloopa (Reply #1)

Fri Apr 6, 2018, 08:39 PM

Apr 2018

The Crash was late 1929. Smoot-Hawley was 1931. It caused a huge contraction of international trade which made it more difficult to get out of the hole. It wasn't until about 1937 or later that the economy really began to move again.

It was like pulling up the ladder from the hole.

International trade is now about 15% of the economy by direct measure and more than that in ripple effects. When growth of the economy is about 2% per year, a large contraction in trade would wipe out growth and put the US into a considerable hole.

wasupaloopa

(4,516 posts)

14. Government spending by the Roosevelt administration began to turn the depression around yet FDR

Reply to Bernardo de La Paz (Reply #4)

Sat Apr 7, 2018, 11:22 AM

Apr 2018

bowed to criticism and lowered spending which slowed the recovery. Only when the spending increased again did the recovery continue,

In all the history of the great depression that I have been taught and read there never was any mention of trade issues.

Bernardo de La Paz

(49,027 posts)

18. Govt spending was key but it had to battle the drop in trade. RepubliCons not in mood for govt spend

Reply to wasupaloopa (Reply #14)

Sat Apr 7, 2018, 01:35 PM

Apr 2018

All the histories I have read discuss trade issues. Do not forget that international trade is now three times more important to the US economy than it was in the 1930. Imports during 1929 were only 4.2% of the United States' GNP and exports were only 5.0%. Now the figures are more like 20% and 13.6% respectively (2013).

If there is a trade war now, RepubliCons are not in the mood for government spending, nor is tRump (except bloating the Defense budget).

https://web.archive.org/web/20090312055958/http://future.state.gov/when/timeline/1921_timeline/smoot_tariff.html

The Smoot-Hawley Tariff was more a consequence of the onset of the Great Depression than an initial cause. But while the tariff might not have caused the Depression, it certainly did not make it any better. It provoked a storm of foreign retaliatory measures and came to stand as a symbol of the "beggar-thy-neighbor" policies (policies designed to improve one's own lot at the expense of that of others) of the 1930s. Such policies contributed to a drastic decline in international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934. More generally, Smoot-Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during a perilous era in international relations.

Breakdown of international trade -- Wikipedia
Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. In a 1995 survey of American economic historians, two-thirds agreed that the Smoot–Hawley Tariff Act at least worsened the Great Depression. Most historians and economists partly blame the American Smoot–Hawley Tariff Act (enacted June 17, 1930) for worsening the depression by seriously reducing international trade and causing retaliatory tariffs in other countries. While foreign trade was a small part of overall economic activity in the U.S. and was concentrated in a few businesses like farming, it was a much larger factor in many other countries.[68] The average ad valorem rate of duties on dutiable imports for 1921–25 was 25.9% but under the new tariff it jumped to 50% during 1931–35. In dollar terms, American exports declined over the next four (4) years from about $5.2 billion in 1929 to $1.7 billion in 1933; so, not only did the physical volume of exports fall, but also the prices fell by about 1/3 as written. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber.

Governments around the world took various steps into spending less money on foreign goods such as: "imposing tariffs, import quotas, and exchange controls". These restrictions formed a lot of tension between trade nations, causing a major deduction during the depression. Not all countries enforced the same measures of protectionism. Some countries raised tariffs drastically and enforced severe restrictions on foreign exchange transactions, while other countries condensed "trade and exchange restrictions only marginally":[69]

"Countries that remained on the gold standard, keeping currencies fixed, were more likely to restrict foreign trade." These countries "resorted to protectionist policies to strengthen the balance of payments and limit gold losses." They hoped that these restrictions and depletions would hold the economic decline.[69]
Countries that abandoned the gold standard, allowed their currencies to depreciate which caused their balance of payments to strengthen. It also freed up monetary policy so that central banks could lower interest rates and act as lenders of last resort. They possessed the best policy instruments to fight the Depression and did not need protectionism.[69]
"The length and depth of a country’s economic downturn and the timing and vigor of its recovery is related to how long it remained on the gold standard. Countries abandoning the gold standard relatively early experienced relatively mild recessions and early recoveries. In contrast, countries remaining on the gold standard experienced prolonged slumps."[69]

Effect of tariffs
See also: Smoot–Hawley Tariff Act

The consensus view among economists and economic historians is that the passage of the Smoot-Hawley Tariff exacerbated the Great Depression,[70] although there is disagreement as to how much. In the popular view, the Smoot-Hawley Tariff was a leading cause of the depression.[71][72] However, many economists hold the opinion that the tariff act did not greatly worsen the depression.

Farmer-Rick

(10,197 posts)

5. Thank you for that injection of reality

Reply to wasupaloopa (Reply #1)

Fri Apr 6, 2018, 08:40 PM

Apr 2018

Capitalism always has crashes. It is a built in characteristic of an unstable and unequal economic system. Like feudalism always had wars and slavery always had slave revolts, capitalism always has crashes.

Bernardo de La Paz

(49,027 posts)

9. The cause of crashes is not capitalism.

Reply to Farmer-Rick (Reply #5)

Fri Apr 6, 2018, 09:46 PM

Apr 2018

It is the lack of proper monitoring and regulation of capitalism. Well regulated capitalism is stable and when capitalism and inheritance are progressively taxed it is not unequal (socialist capitalism). There are other factors such as restricted flow of information / lack of transparency, but all other systems have crashes from such factors or face huge impediments that hold back economies and progress.

There were few regulations in the late 1800s and early 1900s in the US. Crashes, recessions, and depressions were more frequent than now.

The Crash of 2007 was caused by deregulation during the GW "Shrub" Bush era: mortgages and derivatives of mortgages were not properly regulated.

Obama did not stabilize the system by discarding capitalism and instituting communism, despite all the foaming-at-the-mouth RW commentators who said he was a communist.

Now the RepubliCONs want to eviscerate Dodd-Frank regulations.

Farmer-Rick

(10,197 posts)

10. Well, even by your own admission

Reply to Bernardo de La Paz (Reply #9)

Fri Apr 6, 2018, 10:36 PM

Apr 2018

No one seems to be able to regulate it well enough to keep it from crashing.

And it will crash yet again. What we really need is a more democratic economy to match our striving for a democratic government.

Bernardo de La Paz

(49,027 posts)

13. Not my "own admission". No system is perfect, but we are getting better at regulating.

Reply to Farmer-Rick (Reply #10)

Fri Apr 6, 2018, 11:22 PM

Apr 2018

I do endorse, with you, democratic economies with democratic governments.

KPN

(15,647 posts)

15. Yes. It seems that crashes are caused by people -- or groups of people -- of influence who

Reply to Bernardo de La Paz (Reply #9)

Sat Apr 7, 2018, 01:23 PM

Apr 2018

take advantage of capitalism for their own excessive self interests, i.e., greed. While crashes are not necessarily an inexorable consequence of capitalism, crashes do seem inevitable in virtually any economic system due to human nature. Of economic systems thus far imagined and created by humans, capitalism is the one that has been most effective when societal prosperity is the metric by which success is gauged; at it's root, it is human nature (greed) that causes it's failures. And that, as you say, can only be avoided with "proper monitoring and regulation".

Sadly, regulation is equated with socialism and both have become pejoratives for many today. And unfettered capitalism will always run amok.

Bernardo de La Paz

(49,027 posts)

19. I agree with your well-written statement of the issues. . . . nt

Reply to KPN (Reply #15)

Sat Apr 7, 2018, 01:37 PM

Apr 2018

gordianot

(15,242 posts)

2. Trumpism depends on a sole winner.

Reply to TomCADem (Original post)

Fri Apr 6, 2018, 08:35 PM

Apr 2018

The only possible winner in Trumpism can be Trump and not necessarily Trump followers.

KPN

(15,647 posts)

16. BINGO!

Reply to gordianot (Reply #2)

Sat Apr 7, 2018, 01:25 PM

Apr 2018

That's what this whole nightmare is all about ... in a nutshell.

CountAllVotes

(20,877 posts)

6. Found among the rubble

Reply to TomCADem (Original post)

Fri Apr 6, 2018, 08:42 PM

Apr 2018

My grandfather was a Republican at one time.

After he died I found a political button he had.

It said, "SPEED RECOVERY! RE-ELECT HOOVER!"

That sealed the fate. They lost the whole load, house included as they were heavily invested in the Wall Street Casino! He died with a large portrait of FDR hanging over his dinner table = he learned!

Some people never learn that greed just doesn't pay real well in the long run!

How many times does history have to repeat itself?

They've done a fine job of robbing people on fixed incomes of their savings accts. and luring them into the Casino being the rates have been hung at less than 1% for far too long and they've padded the coffers of the rich with dump homes selling for $1,000,000 a pop.

What a scam for all involved!

Beartracks

(12,821 posts)

7. Kinda gives the impression Trump sucks at business.

Reply to TomCADem (Original post)

Fri Apr 6, 2018, 09:04 PM

Apr 2018

Oh, that's right. He's had how many bankruptcies ?

He does suck at business.

============

CountAllVotes

(20,877 posts)

8. 7 or ...

Reply to Beartracks (Reply #7)

Fri Apr 6, 2018, 09:14 PM

Apr 2018

is it 8 or 9 or 10?

What a stupid stupid country to elect this fool of a man as pResident of the USA! How dumb can ya'll get? He's done gone bust at least 7 times!

MAKE AMERICA GREAT AGAIN = Póg mo thóin !!