-90% Stock Market Crash in An US Trade War Historically! Turnaround Signals Revealed!

Summary

In this video, the speaker compares the current global trade war, particularly led by Donald Trump, to the historical 1930 Smooth-Hawley Tariff Act, which worsened the Great Depression. By analyzing the economic consequences of tariffs and retaliations from other countries, the speaker highlights the potential for a severe global downturn similar to that in the early 1930s. They stress the importance of identifying turning points in policy and preparing for worst-case scenarios while encouraging viewers to stay informed and accumulate financial liquidity to weather potential crises.

Takeaways

• 😀 A historical event similar to today's global trade war, particularly under Donald Trump's policies, could have a significant negative impact on the economy.
• 😀 The smooth-Hawley Tariff Act of 1930 is identified as a past event with parallels to the current trade war, worsening the Great Depression and causing global economic downturn.
• 😀 Predicting future economic outcomes involves studying historical events that have had similar economic effects, which is the key to understanding potential outcomes of the trade war.
• 😀 The 1982 market recovery after the Paul Volcker-led Federal Reserve's actions showed how a significant turning point can dramatically shift the economy and stock market.
• 😀 The current global trade war, unlike the 2018 US-China trade war, is on a much larger scale, affecting many more countries and industries.
• 😀 The smooth-Hawley Tariff Act raised import tariffs to protect US businesses, but led to a massive retaliation by other countries, causing a 30% market decline and worsening the Great Depression.
• 😀 The act’s impact caused global trade to collapse, leading to deflation, falling prices, and major banking failures due to inability to repay loans.
• 😀 The US experienced a drastic 67% drop in exports after the smooth-Hawley Tariff Act, which led to bankruptcies, a rise in unemployment, and further economic damage.
• 😀 The eventual reversal of tariffs by President Franklin D. Roosevelt helped the market recover by 1934, signaling that policy changes can mitigate severe economic crises.
• 😀 The key indicators to monitor for the current trade war include whether Donald Trump is bluffing with his tariff policies and whether other countries can negotiate out of the crisis.
• 😀 The worst-case scenario in the current situation might resemble a blend of the 2018 trade war and the smooth-Hawley Tariff Act crisis, with severe consequences for the global economy and stock markets.

Q & A

What historical event does the speaker compare the current trade war with Donald Trump to?

The speaker compares the current trade war to the Smoot-Hawley Tariff Act of 1930, which raised US import tariffs and worsened the Great Depression.

What was the purpose of the Smoot-Hawley Tariff Act of 1930?

The Smoot-Hawley Tariff Act was intended to protect American farmers and businesses from foreign competition by raising tariffs on over 20,000 goods.

How did the Smoot-Hawley Tariff Act contribute to the Great Depression?

While the Smoot-Hawley Tariff Act did not cause the Great Depression, it worsened the severity of the crisis by prompting retaliatory tariffs from other countries, leading to a collapse in global trade.

What were the economic impacts of the Smoot-Hawley Tariff Act?

The Act led to a 60% drop in global trade, a 67% decline in US exports, and a massive rise in unemployment, which reached 25% by 1933.

How did the stock market react to the implementation of the Smoot-Hawley Tariff Act?

The stock market continued to decline after the Act's implementation, deepening the effects of the 1929 crash and causing a 90% loss in the Dow Jones Industrial Index by 1932.

How did President Roosevelt's actions help reverse the effects of the Smoot-Hawley Tariff Act?

President Roosevelt's administration worked to reduce tariffs starting in 1934, and the Reciprocal Trade Agreements Act allowed the president to negotiate lower tariffs with foreign nations, helping to stabilize the economy.

How does the speaker compare the current trade war to the 2018 US-China trade war?

The speaker argues that the current trade war is much larger than the 2018 US-China trade war, which had a smaller scale and only caused short-term inflation and a major long-term economic slowdown.

What are the potential worst-case scenarios for the current trade war according to the speaker?

The worst-case scenario could be similar to the economic fallout from the Smoot-Hawley Tariff Act, with a massive decline in global trade, economic activity, and potential deflation. This could take 3 to 4 years to resolve.

What key signals should people watch out for in the current trade war?

People should watch for signs that Trump might be bluffing, as he has been alternating between imposing and withdrawing tariffs to gain leverage. Additionally, the ability of recipient countries to negotiate the crisis away is important.

What is the significance of understanding history in predicting future economic events?

The speaker emphasizes that while history may not repeat itself exactly, it often rhymes, and understanding past events can help predict and prepare for future crises. This knowledge allows individuals to recognize turning points and react accordingly.