A view emerged that the Supreme Court could side with the administration over tariff legality. Reference to the 1930 Smoot-Hawley Tariff Act highlights how raised tariffs can deepen economic decline. Smoot-Hawley is widely regarded as an example of economic self-harm that worsened the Great Depression. Markets reacted nervously, with US futures sliding and major European indices weakening. US stock markets were closed for Labor Day, delaying immediate price discovery. Tariff policy is portrayed as more than accounting changes, functioning as global power politics that coincide with pressure on the Federal Reserve.
"In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act. Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone?... Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression."
Markets don't like talk of this sort - Smoot-Hawley is widely regarded as a stunning example of economic self-harm. The US stock markets were closed yesterday for Labor Day , so I guess we'll find out the reaction to the court ruling that said most of Trump tariffs are illegal, and the response from the White House via Bessent, today. So far, US futures are pushing lower following Friday's decline, with S&P 500 futs testing the key near-term support of the 20-day line.
Markets should be used to the volatile and erratic application of Trump's economic policies, particularly with regard to tariffs. They are not just a simple case of looking at the accounting and moving some figures around. They are global power politics and a reshaping of the world order. And it's happening at the same time as the administration continues to assail the Federal Reserve.
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