Over the weekend I was reading an article that compared the 1929...

Over the weekend I was reading an article that compared the 1929 stockmarket collapse to that in 2008 and how tariffs had backfired in 1929 and were unlikely to be used again. The article is here, just replace Europe with China for the current situation.



3.) The third difference is that even though we have a new Democrat in the Whitehouse, it is unlikely that there will be new tariffs and taxes on imports such as Smoot Hawley in 1930. It is now very clear that the import duties enacted in the 1930’s effectively put the nail in the coffin of the economy at that time, and it is hopefully unlikely for that specific mistake to be repeated. As a result of the U.S. Smoot-Hawley tariff, European governments retaliated with their own additional tariffs and international trade virtually ground to a halt. Germany was struggling to pay off its WWI war debts and its economy was too weak for it to keep current on payments. Forced banking holidays in Germany and Austria followed shortly thereafter in 1931, and the British system became illiquid because many of its banking assets became trapped and illiquid as a result of the German meltdown. The collapse of global trade as a direct result of these tariffs dealt a lethal blow to an already reeling U.S. economy. In the 2008 crisis, however, there still exists many relatively healthy international trading partners, particularly in Asia, and the continued growth in their economies should enable the U.S. to recover a lot sooner than in 1929. Unless, of course, the U.S. government does something really stupid vis a vis current tariff and trade policy.