China Retaliates with Tariffs and Trade Restrictions

April 7, 2025

Trade War 2

China imposed a 34% retaliatory tariff on all US goods that will go into effect on April 10.

Trump hit China with a 34% tariff in addition to the 20% levy implemented earlier in the year, marking up all Chinese exports by 54%. China is not taking matter lightly, and in addition to tariffs, has added 16 US entities to its export control list. Dual-use items from these companies will be prohibited from entering China. Another 11 US agencies were added to the “unreliable entities” list, which the commerce ministry believe “undermined” China’s national security and sovereignty.

The Ukraine mineral deal will become more important now that China as placed controls on exporting an array of rare earth minerals that are crucial for manufacturing. Autos, batteries, smartphones, military defense, and countless other industries will take a blow from these new restrictions.

China has also issued a formal complaint with the World Trade Organization, declaring that the US has violated global trade rules and unfairly punished China. The WTO has 60 days to resolve the matter, and if no progress occurs, China may request adjudication by the Dispute Settlement Body. China has called these “retaliatory” tariffs “unilateral bullying” and pleaded for Washington to drop the levies.

“The US practice is inconsistent with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice that not only undermines the interests of the United States itself, but also endangers global economic development and the stability of the production and supply chain,” the state council tariff commission stated.

The US exported $143.5 billion in goods to China in 2024, a 2.9% decrease from the year prior. Imports from China in 2024 totaled $438.9 billion, a 2.8% increase from 2023. American companies heavily rely on Chinese imports. The effects of these tariffs will prove utterly disastrous in the coming months when we will feel the full impact of the so-called “liberation.”

Obama Encourages Student Protests

April 7, 2025

Trump Obama Neocon War Bombs

Former President Barack Obama is urging Americans to resist Trump’s policies even if it means making “sacrifices.” “It has been easy during most of our lifetimes to say you are a progressive, or say you are for social justice, or say you are for free speech, and not have to pay a price for it…And now we’re in one of those moments when…it’s not enough just to say you’re for something. You may actually have to do something and possibly sacrifice a little bit,” Obama said.

Obama declared that universities were under attack by the Trump Administration. Trump has revoked funding for schools that permitted pro-Hamas rallies and deported international students who took part in those protests. There was clear evidence that many of these rallies were organized by powerful outside influencers funded by Democrat-backed super PACs and philanthropists like Soros. Worse, international terrorist organizations influenced these rallies. Sami Al-Arian, a known terrorist who was once deported, advised associates and his wife to camp out along with the college students.

Obama also called upon law firms to resist the current president, hoping for massive lawsuits to be brought against the current administration. Obama did not specify what “sacrifices” would be needed but his message is clear—raise hell.

“All of you have grown up in an international order that was created by America after World War II. … This is an important moment because in the last two months, the U.S. government has been trying to destroy that order,” Obama said. “Democracy is pretty recent in its vintage. An international order where you cooperate instead of fight is new. It’s fragile.”

obama trump meeting

The social justice warriors have already lost control. Tesla dealerships have burned to the ground, while every day citizens have had their vehicles vandalized with swastikas or worse. The left pushes for social unrest when they are losing. Obama is promoting the rhetoric that Trump is a threat to democracy, and as such, the people should continue to fight the current law and order. It should be the responsibility of politicians to pushback on policies. But since the people are not voting for politicians on the left, Democratic leaders want the public to protest and make headlines.

The left spent the last four years threatening anyone who did not accept Biden as their president. Now, we have a former president emerging from the shadows to urge his supporters to resist democracy and ignore the current administration’s policies that the majority of Americans voted for.

Schwab Steps Down

April 7, 2025

Schwab the Forum

Klaus Schwab, 87, announced he is stepping down from the helm of the World Economic Forum. Schwab’s departure is symbolic—a signal that the elite agenda of top-down control, championed under the guise of “stakeholder capitalism,” is starting to unravel. The Build Back Better nations will continue to push for Agenda 2030 and the Great Reset that will inevitably end in failure, but this is the first crack in the dam.

His successor has yet to be appointed, but last year he handed over some of his executive duties to Borge Brende. Brende is a Norwegian politician, former trade minister, and former minister of foreign affairs. He formerly advocated for China, the US, and India, the “Group of Three” as he has deemed them, to step up and take on WEF initiatives in hopes that the rest of the world would follow. Good luck with that happening with the current state of geopolitics.

Schwab 2030 Overthrow USA 1

“What is essential now after the turmoil of the last months, is to recover our sense of mission,” Schwab told the Financial Times without specifying. Schwab himself has admitted that his agenda is failing. The appointment of Donald Trump was a huge knock to the WEF. Trump certainly is not supporting an agenda that includes allowing an unelected tribune to overthrow the US as the world’s leading superpower. Trump signed an executive order outlawing the creation of CBDC. Schwab was relying on the dollar moving on the grid, creating a cashless society that could be tracked and controlled.

Schwab also lost a few of his favorite puppets like Boris Johnson and Justin Trudeau. Nations are beginning to abandon the World Health Organization, and Tedros has less power. No one cares about Greta Thunberg and the countless “end of times” messages spouted out by the climate zealots. The entire premise of ongoing pandemics is fading as the people are unlikely to fall for that scam twice. Bill Gates has even fled to Europe, the strongest remaining frontier for the Great Reset.

Look around at how these globalist policies are going thus far. Europe is in economic decline, largely due to these utopian policies like Net Zero which Schwab and the WEF forcefully endorsed. Germany, once the engine of the continent, is now declining because ideology was placed above practicality. Energy shortages, deindustrialization, and capital flight—this is the real legacy of Schwab’s vision. Companies have abandoned ESG initiatives, with even BlackRock’s Larry Fink coming out and stating stakeholder capitalism and ESG policies have failed.

I said in 2021, “It would not surprise me if we start seeing the WEF itself under siege.” The people have woken up. “You will own nothing and be happy,” has become a very well-known phrase as the masses have begun to pay attention to the plans outlined in Agenda 2030. They believed that the people, the plebian Great Unwashed, would be too stupid to understand their plot. Instead, the people are voting against globalist policies and authoritarian governments.

Now that he’s stepping aside, do not mistake this for a surrender. The globalists are still keen on forming a one-world government. The infrastructure he helped build remains. The infiltrated cabinets, the think tanks, and the NGOs are still pushing the same agenda. The tide is turning because the economic policies they’ve promoted simply do not work.

Did Trump Deliberately Crash the Stock Market?

April 7, 2025

QUESTION: Do you buy this claim that Trump is crashing the US stock market by 20% to force the Fed to lower rates so the money will go into Treasuries? Is he breaking the London metals dealers’ hold to suppress the gold price? Lastly, do you buy this idea that Trump and his Secretary of the Treasury want to revalue gold and reestablish Bretton Woods?

FD

DJIND M Array 9 15 24

ANSWER: Well, that is a mouthful. Look, the computer projected this correction a year in advance. Here is the Dow Monthly Timing Array from September 2024. It showed the turning point in November, which remains as the highest monthly closing, a turning point in March, and a Panic Cycle in April. This was before Trump even won the election. At the November WEC in 2024, I said that I wished Trump well, but it did not matter who won; this would not prevent the recession into 2028.

1987 Crash Brady Commission

Nobody, but nobody, can crash the market deliberately. When I was called into the Brady Commission to investigate the 1987 Crash, they started with that same fictional nonsense – We are going to find that short that caused the crash. I said, look, every investigation since 1907 began with those same words, and nobody has ever been found. Look, the government cannot create perpetual prosperity using Keynesianism or Marxism any more than it can support a market. The Fed tried during the Great Depression and failed, as did the Japanese government tried that during the 1989 Crash and failed. In both cases, they made it worse by giving false hope that the government can save the day. THEY CANNOT!!!!!

2015_Martin_Armstrong_is_the_Forex_Person_of_the_Year_About_FXStreet

I met with the Swiss central bank and warned them that the peg would break, as I did with the British government. I was told they could hold it, and I said the odds were on my side since NOBODY has ever been able to do that. The peg broke, and I was named FOREX Person of the year.

Trump has not deliberately crashed the stock market to get the Fed to lower rates and sell more treasuries. Come on! First, the assumption is that these people are smarter than they are, and second, that they have unlimited power, which was the theory of Karl Marx. If either of these assumptions were true, then I should not be called in by governments worldwide. Why call me if they possess superior knowledge and power? They are no different than the rest of us.

As long as people make up these conspiracy theories, they are not just feeding propaganda that prevents people from understanding how the system really works, but they are supporting the theories of Karl Marx that the government has the power and should use it. That is the Democrats’ dogma.

 

Elon Musk states at this cabinet meeting that the reason he is there is to reduce the cost of the government, BECAUSE the debt is unsustainable. He states that the interest expenditures have exceeded defense. Lowering interest rates is NOT a long-term solution. You cannot continually run these deficits indefinitely. This will all come crashing down when the line at the door to by Treauries no longer forms. Then you get the sovereign debt crisis and the default.

 

 

 

Scott Bessent on the end of central planning and a new coming world order monetarily. While Bessent mentions a reorganization of the world monetary and trade system in this clip prior to him becoming the Secretary of the Treasury, he mentions Bretton Woods, the Treaty of Versailles, and the International Steel Agreement.


The Treaty of Versailles (1919)

The Treaty primarily focused on ending World War I and imposing punitive measures on Germany, rather than comprehensively regulating international trade. However, it did include specific economic provisions that indirectly influenced trade:

  1. Reparations and Economic Restrictions:
    Germany was required to pay massive reparations, which strained its economy and limited its capacity to engage in international trade. The treaty also mandated the surrender of German merchant ships to the Allies, reducing Germany’s ability to participate in maritime trade.
  2. Resource and Territorial Losses:
    Germany lost territories rich in resources (e.g., coal-rich Saar Basin to French control), affecting its industrial output and trade potential. Colonies were redistributed as League of Nations mandates, altering global resource access.
  3. Access to Waterways:
    The treaty internationalized key waterways like the Kiel Canal and Rhine River, ensuring open passage for all nations, which facilitated trade routes but was not a direct regulation of trade itself.
  4. Most-Favored-Nation Clauses:
    Some provisions required Germany to grant preferential trade terms to Allied nations temporarily, though these were limited in scope and duration.
  5. League of Nations Role:
    While the treaty established the League of Nations, broader international trade regulation was left to later initiatives (e.g., 1927 World Economic Conference) rather than the treaty itself.

Consequently, the Treaty of Versailles did not systematically regulate international trade but imposed economic measures on Germany that indirectly impacted global commerce. Broader trade frameworks emerged later through other agreements and the League of Nations.


The International Steel Agreement

This was instituted in 1926 in Europe and was the first international steel cartel. France did not have the necessary coke to really make steel, as was the case with Germany. Also, the Germans had flooded 18 out of 19 of the French mines, which hindered their ability to regain steel production. This was an attempt to regulate trade and to sustain prices, while equitably dividing up quotas amongst member states and companies. This agreement faced difficulties due to Nazi Germany’s desire to re-arm and increased British and American exports after the Wall Street crash of 1929. The US was flooding steel into Europe. Hence, this agreement collapsed after the Great Depression of 1930s.


The_Guardian_Euro 12 30 1998 Pound Euro

The Euro was an attempt to resurrect the idea of Bretton Woods with a single currency. They were pushing Britain to join the euro and even staged a coup to remove Margaret Thatcher. John Major took the pound into the ERM, and that collapse made Soros rich and famous. Eliminating floating currencies is incompatible with politics as long as they are free to engage in deficit spending and endless borrowing.

Napoleon Single Currency 1024x675

This obsession with world trade and domestic economics has been going on for thousands of years. Napoleon had actually summoned the best minds and talents from all over Europe into his service. His court was deliberately filled with able men from all over Europe: Dutch, German, Italian, and even Polish. These foreigners worked in the highest offices of his imperial civil service. Today, Macron would go into convulsions if non-French ministers were running the government in France.

Napoleon created the first single currency in Europe after the Roman Empire. He standardized the weight of the coins so that 40 francs equaled 40 Lire in Italy and 320 reales in Spain. This was really Napoleon’s idea of resurrecting the Roman Empire.

Julius CAESAR denarius conquers gaul 452 4

 

Indeed, Napoleon was creating a single currency attempt to restore the standard monetary system of the Roman Empire. Both Napoleon and Hitler had similar ideas of a unified Europe. It was Julius Caesar (100- 44 BC) who conquered Europe and, in the process, created a single language and monetary system. Indeed, this silver denarius illustrates his victory over Gaul, showing an unshaven Gallic barbarian seated on the ground below his trophy.

Latin Monetary Union 1005x1024

Julius Caesar accomplished the unification of Europe. However, it was Napoleon who standardized the monetary system post-Rome, which became the inspiration for the Latin Monetary Union by 1865.

EuropeanGoldCoinage 1803 1947 R

 

 

Even at Bretton Woods, John Maynard Keynes had proposed creating an overarching “International Clearing Union” that potentially every nation would join. This would become the new reserve currency, called the “BANCOR.” It would be used for settling international accounts. Each member nation would pay a membership quota in proportion to their total trade. Nations that were in surplus would receive BANCOR credit, while those in deficit would have a negative account. This proposal was intended to increase trade. If a country moved into a perpetual deficit, it would be required to devalue to reduce imports. On the other hand, move too far into surplus, and their currency would be required to appreciate to increase imports. Then there would also be a bancor tax levied at a progressive rate on anyone with a large trade imbalance.

The IMF created its SDR which was not the equivalent to Keynes’ Bancor, yet it represents a pragmatic adaptation of some principles. The Bancor was a visionary proposal for a new monetary order, whereas the SDR is a technical instrument within the existing IMF framework. Some have argued that Keynes’ idea should be used rather than tariffs.

Europe is still very much living under mercantilism. Kohl took Germany into the euro, denying the people the right to vote, because he assumed that a single currency would increase Germany’s sales of products to the rest of Europe, operating under mercantilism. The prevailing object under mercantilism is to twist mutually beneficial international trade to a one-sided advantage. This is the Neoclassical economic view where economists agreed that the science was settled and that free trade was safe and effective against mercantilism.

Currently, some believe that our trade deficit is destroying significant segments of American industry and eliminating badly needed jobs. They totally ignore the consumer that protects overpriced labor, which reduces the standard of living for the whole. They argue that this is happening because we have embraced free trade and do not pay attention.

Keynes wrote in his original proposal that the basic principle is the necessary equality of credits and debits, of assets and liabilities. If no credits can be removed outside the clearing system but only transferred within it, the Union itself can never be in difficulties.”

Newsweek Gold Push 1971

Bretton Woods operated for a while and was an improvement on the prewar gold standard. However, France in particular remained very hostile to Britain and the USA under De Gaulle. They envisioned that France would rise to lead the world if it had the gold reserves. France was eagerly buying up dollars and redeeming them for gold which ultimately broke the back of the entire Bretton Woods monetary fixed rate system. This throwback to mercantilism and the gold standard undermined the entire system. Meanwhile, nobody in Europe understood what made the United States the reserve currency was not gold – it was the American consumer. Germany needed to see its cars to American just as Japan. As long as the US was the major consumer-based economy, it had to price goods in dollars to sell them.

Newsweek_Feb_10_1975_Petrodollar r

 

When Bretton Woods collapsed in 1971 and the dollar remained the cornerstone of the world economy, they needed an explanation for why they were wrong. Newsweek came out with the theory in 1975. It was all because oil was priced in dollars. That was the answer! This has continued to confuse people ever since. The biggest reason has been right in front of their nose, and they have ignored it – the consumer.

 

  • Valuation Methods:
    • FOB (Free on Board): Value at the exporter’s port, excluding international shipping/insurance costs.
    • CIF (Cost, Insurance, Freight): Value at the importer’s port, including shipping/insurance. This causes discrepancies.

There are different valuation methods to calculate trade (FOB vs CIF), timing differences (when the transaction is recorded), misclassification, or even smuggling and fraud. For example, Country A exports goods to Country B. Country A records it at FOB value when it leaves, while Country B records it at CIF when it arrives, leading to a higher import value in Country B’s data.

In summary, calculating trade numbers involves collecting data from multiple sources (customs, surveys, financial institutions), standardizing using international systems (HS codes, BoP guidelines), and dealing with discrepancies due to different methodologies or reporting practices. It’s a complex process with room for errors and inconsistencies, which international organizations work to mitigate through harmonized guidelines.

Trade numbers, which measure the flow of goods, services, and money between countries, are calculated through a combination of data collection, standardization, and international guidelines.

Goods Trade Calculation

  • Data Sources:
    • Customs Declarations: Import/export values are recorded when goods cross borders. Declarations include product type, quantity, and value.
    • Harmonized System (HS Codes): A standardized classification system (6-digit codes) ensures consistency in categorizing goods globally.
  • Challenges:
    • Misclassification of goods under HS codes.
    • Smuggling or underreporting to evade tariffs.
    • Timing differences (e.g., goods in transit at year-end).

Services Trade Calculation

  • Data Sources:
    • Surveys of businesses (e.g., banks, tech firms) providing cross-border services.
    • Financial records (e.g., royalties, tourism spending, consulting fees).
  • Categories: Includes tourism, transportation, intellectual property, and financial services.
  • Challenges:
    • Intangible nature makes tracking harder than goods.
    • Reliance on self-reporting is inherently inconsistent.

Money Flow (Financial Account)

Here we track cross-border investments and capital movements, recorded in the Balance of Payments (BoP)

  • Components:
    • Foreign Direct Investment (FDI): Long-term investments (e.g., building factories).
    • Portfolio Investment: Short-term flows (e.g., stocks, bonds).
    • Loans and Banking Flows: Cross-border lending/borrowing.
    • Reserves: Central bank holdings of foreign currencies.
  • Data Sources:
    • Central banks and financial institutions report transactions.
    • International systems like SWIFT track cross-border payments.
  • Challenges:
    • Illicit flows (e.g., tax evasion, money laundering) are often unreported.
    • Exchange rate fluctuations affect valuations.

International Frameworks

  • Balance of Payments (IMF Guidelines):
    • Current Account: Goods, services, income (e.g., dividends), and transfers (e.g., remittances).
    • Financial Account: Records investments and loans.
  • Trade in Value-Added (TiVA): OECD/WTO initiative to account for supply chains, avoiding double-counting intermediate goods.

FRED US Trade Balance 4 5 25

Understanding trade numbers requires recognizing the complexity of global systems and the ongoing efforts to improve data accuracy through international coordination. I helped the Japanese reduce their trade surplus by purchasing gold in New York and sending it to London to be resold. Because the type of goods being bought and shipped is irrelevant, the bottom line is that trade is calculated on money flows.  Under the Biden Administration, they appear to have assumed that senile Joe was not all there, and they took advantage of the situation. We can see the crisis that has led Trump to take action.

As one reader wrote, after reading the negativity in the NY Times and MSNBC, the question that needed to be answered was: Should I commit suicide this week or wait until next week? If Trump said he would remove all tariffs, they would then say everyone will lose their jobs from the flood of foreign goods. They are no longer honest journalists. They are just propagandists. They do not care about the country or the people. They just have to take the opposite position of Trump, no matter what the subject matter might be.

US Tariffs 1787 2015

They spout the same Democratic propaganda from the ’30s, claiming that tariffs caused the Great Depression. Some 9000 banks failed, and that was caused by Sovereign debt defaults, not tariffs. I am sick and tired of the lies. Programs like MSNBC are polarizing the country and destroying the very foundation of the United States based on Marxist propaganda.

Hoover Quote

Bank Run 1931

The tariff did not cause the bank failures. It was the Sovereign Defaults that they tried to omit from the history books because they did not support their agenda of evil corporations, and we need socialism to survive. Just as they report nothing but hatred of Trump, Hoover was a Republican, and they tried to destroy the Republican Party back then too.

Duranty Walter NYTNY Times Duranty 1931

The NY Times covered up the failure of Communism, and their top journalist was even pushing Communism on FDR. When Gareth Jones (1905-1935) in March of 1933 said the NY Times was reporting about the success of communism was all a lie, the truth finally began to appear. It took the New York Times until 1990 to admit they engaged in fake news, pushing communism, covering up the famine in Ukraine, and suggesting that Stalinism was the Utopia they wanted to impose in the United States. The NYT wrote that their reporting on the Russian Revolution constituted some of the worst reporting to appear in this newspaper.” Duranty also did this to support Roosevelt’s New Deal. He helped install drastic progressiveness in taxation.

Warning FAKE News
Here we are all over again, and the press reports nothing but raw hatred of Donald Trump, all to support once again their LEFTIST agenda. They will not be satisfied until they completely destroy the United States and unleash a violatent civil war.
 

tarifftradewarmeme

A top White House economic adviser said on April 6 that more than 50 countries have contacted the Trump administration to initiate negotiations over a broad swath of tariffs that were announced in the first week of April on nearly every nation in the world. People were shocked that Israel had tariffs on US products after everything we do for Israel. The list goes on and on. This is the ONLY way to reach free trade.

The Crash was More than Just Stocks

April 7, 2025

NY_Copper M Tech 4 6 25

COMMENT: Marty, I just had to write. While everyone is blaming Trump and tariffs for the stock market crash, not only did Socrates forecast that months in advance, but I trade copper professionally, as you know. What you have created should be recognized as the answer society has been searching for over the millennium.  It projected a January low, a two-month reaction, and a Panic for April 2025 with a Directional Change. I was at your WEC in Orlando and Rome when Nigel Farage said you were the alternative to Davos. What you have discovered goes beyond any Nobel Prize. Socrates has exceeded all expectations.

Nobody comes close to your forecasting ability. I can’t wait for Marcus’ film. It was great that you brought him on stage so we could see a face behind the Forecaster.

DC

NY_Copper D Tech 4 6 25NY_Copper M Array 12 9 24

REPLY: Thank you. What I discovered was that we are all indeed connected globally. As I said, over the years, many people have come to encourage me, from John Exter and Milton Friedman to Margaret Thatcher.  I believe that the world would be a better place if we just listened for once. Maggie understood cycles. She stated at our WEC perhaps government should look to cycle to operate.


As we head into an economic decline worldwide, bottoming in 2028, Copper prices have declined due to a combination of factors influencing supply and demand dynamics. There has been Reduced Demand from Key Economies, especially China, a major consumer of copper (used in construction, infrastructure, and manufacturing), as it is experiencing its own economic deceleration, leading to lower copper demand. Global recessions in industrial activity (e.g., during the COVID-19 pandemic) started the depression in demand.

Overproduction has also been an issue as expansion of mining operations or new mines coming online (e.g., in Chile, Peru, or the Democratic Republic of Congo) have led to oversupply, outpacing demand. Then there are High Inventory Levels as we have seen an elevated stockpile in exchanges like the LME and Shanghai Futures Exchange, signalling excess supply, pressuring prices downward.

Then there was also the stronger dollar. As copper is priced in dollars, a stronger dollar makes it more expensive for foreign buyers, reducing demand and lowering prices. This also encourages and increases foreign production for the currency bonus. There has been a gradual shift to alternatives (e.g., aluminum in electrical wiring) or adopting more efficient technologies/recycling, reducing copper demand to some extent.

Tariffs and trade barriers (e.g., U.S.-China trade tensions) have also disrupted supply chains and dampened demand. Stricter policies, intended to raise production costs, could also incentivize alternatives and have indirectly affected demand.

In summary, copper’s decline typically reflects the interplay between macroeconomic trends, supply-chain adjustments, currency movements, and investor behavior. Specific triggers vary by timeframe but often hinge on China’s economic health and global industrial demand.

Political Chaos

I try to show the world there is something here. There is a hidden order within the appearance of chaos. Once you see the pattern and the order, you can never see the chaos again. It is more important than the next trade. There is a method to this, and how we should look at society instead of trying to manipulate it. Yes, the array on Copper was perfect. I’m glad it helped your company and glad you now see the order within the chaos.

DAX 1999

This is the array from our old site back in 1999; I took it from the Wayback Machine. The computer had projected a Panic Cycle in 2008, virtually 10 years in advance. We can follow Marx and Keynes and assume that the government has the supreme power to manipulate society and create constant wars and devastation, like this stupid climate change nonsense. Nobody wants to understand how the universe functions, which leads humanity down this path of continuous disasters.

Volcker Rediscovery

Even Paul Volcker encouraged me and agreed there was a business cycle of about 8 years. I can scream from the rooftops, but they will not listen. As they say, you will never be recognized during your lifetime because you will always be a threat to the status quo. I think that wisestale is probably true.


Forecaster 2025

I believe Marcus is trying to have the film out by the end of this month.

Why is Trump Using Tariffs? The Truth That Has Misled the World on Tariffs

April 6, 2025

FRED US Trade Balance 4 5 25

For all the criticism of Trump and the risk of a global trade war, as Macron wants to unleash a trade war to elevate France to the top of the EU, if we just look at the data, we can see why Trump has taken this approach. Even those Republicans like Rand Paul joining the Democrats in calling tariffs a tax, none of them are looking at this issue objectively or seriously. Under the Biden Administration, not only was there a wholesale invasion of illegal immigrants, but on the trade front, he paid no attention at all, and most seemed to assume he was too senile to pay attention.

They are resoundingly calling Trump insane, mainly because they have something to lose. Free Trade has been one-sided. There is a risk that France will push to impose trade barriers against others to support their Marxist agenda. That will be devastating, but we see the world economy headed into a recession for the USA, yet a Depression for the EU. The fact that Trump imposed a 10% tariff on the UK but 20% on the EU is actually driving a wedge between Starmer’s dream of overruling BREXIT to get back into the Marxist utopia of the EU.

In addition, the belligerence of Macron is having an impact. There is a growing discontent with the European Union and the 20% tariff on the EU, with Macron vowing that full retaliation may prove to be the wedge that starts the fragmentation of the EU. Hungary has its own currency and can quickly leave the EU and resume trade with both the USA and Russia. Ukraine has long suppressed the Hungarian people trapped within the boundaries of Ukraine. The same is true for all of those members questioning the EU yet did not join the euro.

US Tariffs 1787 2015

While all we hear is how the Smoot-Hawley Tariff caused the Great Depression, that was total fiction. Here is a chart of US tariffs since 1784. The Smoot-Hawley tariff was on Agriculture in 1930. The Socialist economist omitted the sovereign defaults of 1931, which included Canada, Europe, South America, and much of Asia.

Tariffs 9 19 1929

Tariffs 10 1 1929 Phila Inquire 484x1024TariffsThe causes of the Great Depression have been debated for decades. The problem with all of the analysis is this same attempt to reduce the cause to a single event. In school, we read The Great Crash by Galbraith. He was a socialist, so he blamed the corporations and never bothered to mention the Sovereign Defaults of 1931, for that would have accused the government instead of the private sector. Then there is the argument that the tariffs at least “contributed” to the Great Depression, if they were the leading factor, again disregarding the Sovereign Debt defaults.

Smoot-Hawley wasn’t signed into law until June 17th, 1930, when stocks had already taken a nosedive from the September 1929 high. Cato Institute’s Alan Reynolds argued that Smoot-Hawley was an ongoing drag on the economy and that it was, in fact, a substantial contribution to the stock market, arguing that traders saw it coming and acted in anticipation. The argument on the one hand correctly states that traders acted in anticipation. Still, it incorrectly adopts the position that BUT FOR the tariff issue, the stock market would have continued higher anyway?

Moreover, the pretense that somehow the Smoot-Hawley Tariff created or contributed to the Great Depression, ignoring the European Sovereign Debt Crisis, is really a specious argument. This ignores the entire issue of tariffs that predate the Smoot-Hawley Act. The Emergency Tariff Act of 1921 was a stopgap tariff measure that was rushed out and put in place until Congress could deal with the issue. The Republican Party wanted to quickly reverse the low rates of the Underwood-Simmons Tariff of the Wilson administration, prewar. Protectionism had never died out but remained merely dormant on the back burner during World War I. After the war, the supporters of tariffs based their arguments on economics and nationalism. They argued that the economic prosperity during the war, as America produced food for Europe and goods, unfolded because there was no competition from imports. Therefore, the abundance of exports created the economic boom (the German export model today, which lurks behind the euro). While on the surface this was correct, they overlooked the problem that Europe could not produce during the war, and therefore, American production sustained Europe. The dominant argument was that the war had ended, and European imports would increase, threatening the current economic prosperity.

The protectionists further argued using nationalism, stating that Americans would now suffer economic hardship after sending our boys to fight in a war that America did not start. They argued that America should remain in isolationism as a policy, staying out of international affairs. Indeed, Roosevelt could not get the USA involved in World War II until the Japanese bombed Pearl Harbor. The attitude toward isolationism and nationalism was very strong in the United States. After World War II, the Deep State pushed for maintaining a global power, ending isolationism with the invention of nuclear weapons.

US Tariffs 1909 1922

Nationalism was on the rise in the United States, as the Senate, in the last days of the Wilson administration, voted against joining the League of Nations. It had been Wilson’s idea that he could not sell to Congress. Isolationism, nationalism, and the concern for continued prosperity merged and supported the protectionists in pushing their arguments for higher protective tariffs. These trends led to the passage of the Emergency Tariff in 1921 and then to the Fordney-McCumber Tariff a year later. The rates of these tariffs rivaled the protectionist Payne-Aldrich Tariff of 1909 and were considerably higher than the Underwood-Simmons Tariff passed in 1913. Tariffs were in place throughout the 1920s. Smoot-Hawley has been criticised as a major cause of the Great Depression, with no mention of the tariffs that predated the 1930 legislation.

The tariff issue was by no means something that was scaring the stock market. The trend from 1927 to 1929 was a significant shift in assets from bonds to equities as hints of a European debt crisis appeared on the horizon. The smart money began to see that the real crisis was debt. This is a serious problem for even today the debt to equity ratio has varied from 7:1 to 10:1. When only a tiny portion of smart money begins to shift to equities, this becomes a bottle-neck and what happens is prices rise exponentially in what I have labeled a “Phase Transition” meaning that prices at least DOUBLE. This is not really Asset Inflation, where assets merely rise in proportion to the decline in the currency. A “Phase Transition” typically marks a shift in capital whereby it concentrates into one sector and often one country.

Irving Fisher Comments 1929

Capital DisplacementIrving Fisher (1867-1947) was a prominent economist of the day who lost his credibility when he said the market had reached a new plateau and thus it would not crash. Part of his reasoning was this shift in capital from bonds to equities. He did not realize that this is a phenomenon I call a Phase Transition, which signals the end of a trend and not the beginning. The shift from bonds to equities can lead to a new plateau, PROVIDED it takes place gradually as a trend. When it erupts short-term and causes a doubling in price, this is a warning sign that we are dealing with a bubble rather than a broad band shift in the investment trend, as was the case following the turn of the Economic Confidence Model back in 1985. In that case, when the Dow Jones Industrials were at the 1,000 level, we forecast that the Dow Jones Industrial Average would see 6,000 in a few years. That was the shift in trend for cyclically the new wave was beginning, not ending, and we would move into a Private Wave (shift to equities) and were concluding the end of a Public Wave (when bonds are the #1 investment strategy).

1927 Secret Banking g4To understand the entire Smoot-Hawley Tariffs which are blamed by most economists for contributing to the Great Depression, we must look at the whole economy both globally and domestically. It was in 1927 when there was not merely a secret meeting of the four main central banks that conspired to lower US interest rates in the hope of deflecting the capital flows back to Europe, but also the League of Nations’ World Economic Conference, which also met at Geneva that year. At that conference, it was officially concluded that “the time has come to put an end to tariffs, and to move in the opposite direction.”

The resentment toward Germany was really too great, particularly for the French. This was despite the fact that the German government had been overthrown in the 1918 Revolution that created the Weimar Republic. The reparation payments imposed on Germany led to the revolution in 1918 and the overthrow of the German Emperor. These payments could only be made through gold, services, or goods. The German people were being punished for the actions of the political leaders. France broke ranks and began in 1928, enacting a new tariff law and quota system. This was targeted at Germany, and if they could not sell goods internationally, then they could not make reparation payments. This would eventually lead to proposals to allow Austria and Germany to merge in 1931, to which the French began shorting German bonds in the marketplace. The punishment of Germany led to the rise of Hitler. They failed to distinguish between the previous government and the German people.

Civil Work Force 1900 1980

Smoot_HawleyAdditionally, the economic shift in trend due to the innovation of electricity combined with the combustion engine had drastically altered the economy. In 1900, about 40% of the civil workforce was employed in agriculture. By the late 1920s, the United States economy had changed remarkably. There were exceptional gains in productivity due to electrification, which increased production of goods, and the combustion engine, which profoundly altered agricultural production. With tractors replacing horses and mules, up to 25% of the agricultural land had previously been used to feed horses and mules. This land suddenly became available to produce crops. The ability to produce food soared and exceeded market demand, creating what was called overproduction and underconsumption.

This is what Senator Reed Smoot, who was a Republican from Utah and chairman of the Senate Finance Committee, and  Congressman Willis C. Hawley, who was a Republican from Oregon and chairman of the House Ways and Means Committee, were focused on listening to farmers who wanted high tariffs to prevent competition. Neither Utah nor Oregon was an industrial state. Smoot-Hawley was to protect farmers from falling prices not due to imports as much as it was to overproduction, much as the Silver Democrats had done for miners during the second half of the 19th Century.

Nonetheless, because of World War I and the wholesale destruction of the European economy, the United States was still running a trade account surplus as manufactured exports of goods were rising rapidly. Therefore, Smoot was looking primarily at food exports, which had been declining as Europe found it easier to restore agricultural production than to manufacture goods requiring the construction of plants.  The actual value of food imports was a little over half that of manufactured imports, and thus, the farmers were crying for help in an industry that was changing forever. It was NOT true that the markets were so concerned about tariffs when industrial production was in a trade surplus and profits were rising.

Senator Reed Smoot, a Republican from Utah and chairman of the Senate Finance Committee, championed a tariff increase in 1929, which became the Smoot–Hawley Tariff Bill. In his memoirs, Smoot explained: “The world is paying for its ruthless destruction of life and property in the World War and for its failure to adjust purchasing power to productive capacity during the industrial revolution of the decade following the war.” This was a partially correct statement, but he overlooked the dramatic change in the economic foundation set in motion by the innovation of electricity and the combustion engine.

Dow May 1929 Tariff Passes

The 1928 Presidential election saw Herbert Hoover promise to help the farmers by increasing tariffs on agricultural products. Upon winning the election, Hoover did ask Congress for an increase in tariff rates for agricultural goods and a decrease in rates for industrial goods. He saw this as a balancing act to appease trading partner nations. Indeed, the House passed a version of the act in May 1929, increasing tariffs on primarily agricultural products. Those who have blamed the Smoot-Hawley Act as a significant cause of the 1929 Crash argue that when the House passed the bill on May 28th, 1929, which was the first version, the stock market was battered. This is not true.

The bill was passed on Monday, 28th, which was the low point, and it was not attributed to the tariff bill. On May 3oth that week, the British elections took place and ended in a hung Parliament, which was regarded politically as a crisis. The following day, the Ford Motor Company signed a nine-year contract with the Soviet Union. The Soviets agreed to purchase $30 million worth of Ford products within four years, while Ford decided to provide technical advice and help build an automobile factory in Nizhny Novgorod. To say the market responded negatively in May 1929 in “anticipation” of the tariffs was simply not true. There was a clear distinction between agriculture and industrial imports.

Dow Oct 1923 1929 Failed Banker Attempt to Support Market 1024x582

10 24 1929 Italian Prince Escapes AssassinationThose who blame tariffs further argue that on Wednesday, October 23rd, 1929, it became clear the tariffs would be much broader than first believed. Again, they portray the tariffs as the reason for the crash. I found no headlines to support that interpretation, which appears to be predetermined. That very day of the 23rd, the bankers attempted to support the market. The downside of such intervention is that when it fails, confidence collapses completely.  Also on that day, there was an assassination attempt on the Italian Crown Prince. He narrowly escaped with his life. Americans were concerned that Europe was still fighting among itself, which was entirely correct. The resentment concerning Germany was massive and would not just fade away gracefully.

Glass CarterThis focus on tariffs as the culprit for creating the crash was an argument from the Democrats, as they did against Reagan with “trickle-down” economics. Along with such tariff proposals, some of the senators advocated a detailed investigation of the Federal Reserve Banking system, as put forth in the pending resolution of Senator William Henry King (1863 – 1949) who was also a Democratic representative from Salt Lake City, Utah who served in the Senate from 1917 until 1941. There was a secret meeting of central bankers to lower US rates in hopes of deflecting capital flows back to Europe to ease the debt crisis building there.

Senator Carter Glass (1858 – 1946) of Virginia, who was one of the authors of the Federal Reserve banking act and then the Glass-Steagall Act, also in the midst of the October crash, started pushing his bill providing for the imposition of a 5% excise tax on sales of stock which had not been held over sixty days. It was his present plan to offer the bill as a “rider” to the pending tariff bill. To say that people feared the tariffs, which really did not impact the industrial stocks, is absolutely absurd. They were concerned about a 5% tax on stock investment that the Democrats were trying to stuff into the Tariff Act. The Democrats contributed to creating the crash in 1929 with these proposals, arguing against the rich.

 

10 24 1929 Hoover Train Wreck 1024x194

Hoover Barn RatThere was also talk of an investigation into the stock market decline to blame someone. Eventually, this would take place and lead to the creation of the Securities & Exchange Commission (SEC). In his memoirs, Herbert Hoover apologized for the investigation into the stock market. On top of that, two men were arrested for placing a car on the train track, which would have wrecked the coming train carrying President Herbert Hoover. No headlines I found covered tariffs as some dark omen for the economy at this junction, is the timeline.

The Senate debated its tariff bill until March 1930, with many Senators trading votes based on their states’ industries. Republicans did not purely support it. The Senate bill passed with 39 Republicans and 5 Democrats voting in favor of the bill because they were from farming states. The conference committee then aligned the two versions by moving to the more significant House tariffs. The House passed the conference bill on a vote of 222 to 153, with the support of 208 Republicans and 14 Democrats. The farmers primarily influenced the Democrats who voted for the bill. The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, implementing what would be called “protectionist” trade policies was signed into law on June 17th, 1930. Once again, when Smoot-Hawley was passed, I found no damning headlines how this would end the economy.

 

Dow 06 18 1929 Bank Intervention 1024x578

6 18 1930 Tariff Passed 1024x672

The bankers were in once again, attempting to manipulate and save the market on the day the Smoot-Hawley Act was enacted. I found no commentary that attributed the decline to the tariff issue. The day the bill was signed, the Democrats argued that the crash was because of the Tariff Act, which completely ignored everything else and was used simply as a political criticism of the Republicans. As the press wrote: “It increased duties on sugar, shoes, lumber, cement, bricks and wool and hides, particularly, aroused the Senate to the most extreme political debate in recent times.” Sadly, because the Democrats kept trying to blame the Great Depression on the Republicans, we have the entire tariffs issue still to this day present a view of creating the crisis, which was simply not true. It was the wholesale default of Sovereign Debt sold by investment banks to the average American public in small denominations. This wiped out people’s savings and resulted in the wholesale default of thousands of American banks, not tariffs.

5 12 1930 Tariff Passed 1024x524

Wheat 1919 1932 14 Year DeclineSpending was being cut, especially for the military. The debate was thus really focused on the cut in spending and the tariff issue on top of aid to Europe. Many in Congress began to consider the Europeans, calling them the “GIMME BOYS, for they wanted free access to the US market while blocking access to their markets to rebuild their economies.

We have to understand that the entire tariff issue began because of the overproduction of agriculture, which had been 40% of the entire civil workforce. The economy was transforming from an agricultural-based system to one of industrialization. Politicians did not understand this economic transformation at this point in time.

Then, in 1931, the rug was pulled out from under the world economy. The bankers’ attempts to support the market failed, and it kept declining, so the confidence level kept declining. The government and the bankers were suddenly cast in a light of total incompetence. Survival became dependent upon oneself. Investors in the stock market were now being hunted. Anyone who was short was being investigated. The Senate eventually held hearings, subpoenaing countless people and interrogating them about their stock holdings. On March 2nd, 1932, senators passed Senate Resolution 84 authorizing the Committee on Banking and Currency to investigate “practices with respect to the buying and selling and the borrowing and lending” of stocks and securities. The committee made little progress, however, during its first 11 months. Banking executives repeatedly denied committee requests for bank records and internal documents. Witnesses easily evaded questions posed by counsel.

Pecora 1882–1971

In early 1933, Banking and Currency Chairman Peter Norbeck (R-SD) hired a new chief counsel, former New York deputy district attorney Ferdinand Pecora. Norbeck called him a “happy discovery.” In April 1933 the new committee chairman Duncan Fletcher (D-FL) offered Senate Resolution 56, expanding the scope of the inquiry to include private banking practices. It was from this assault upon the banking and stock market that the Securities & Exchange Commission (SEC) was born, and the lead prosecutor, Pecora, would become a founding member of the SEC.

Credit AnstaltThe Creditanstalt Bank in Vienna failed on May 11th, 1931, leading to a national currency crisis as investors began pulling their funds from Austrian banks and moving them to other countries. Meanwhile, Germany was in the throes of political turmoil, leaning toward fascism. It was on May 8th, 1931, that the prosecution of Adolf Hitler by Hans Litten (1903-1938) for complicity in manslaughter committed by members of the Sturmabteilung at the Tanzpalast Eden (“Eden Dance Palace”) in Berlin in 1930 was dismissed. Litten was eventually arrested on the night of the Reichstag fire along with other progressive lawyers and leftists. Litten spent the rest of his life in German concentration camps, was tortured, and was constantly subjected to grueling interrogations. Finally, after five years of this treatment, cut off from all outside communication, he committed suicide. His attempt to stop Hitler’s rise was admirable, but it came at such a personal cost.

UBLST 25 MATo argue that the tariffs were even a significant cause of the Great Depression is really ridiculous. It was the product of Democratic propaganda to blame the Republicans for everything, which worked in the end. The real cause that wiped out the world economy came from Sovereign Debt Defaults. Because these were sold in small denominations to the average public, those who believed the stock market was risky and bought bonds suffered the total loss of their investment.

Here is a chart of the bonds that were once listed on the New York Stock Exchange. We can see the collapse in the value of bonds dwarfed that of equities. While the Dow Jones Industrials collapsed by 89%, the bonds collapse 100% and never returned. The collapse in debt saw American municipal also suspend payments. The City of Detroit suspended debt payments in 1937 and resumed in 1963 so they can claim they never defaulted.

The collapse in the bond markets was far more serious than tariffs.

 

Stock Market Crash = Recession

Bond Market Collapse = Depression


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