To understand the future..look into the past..On Trump, Trade and Tariffs

The past may not repeat but it rhymes. Every time a new factor comes to influence the market ,do remember to look in history books about similar instances in the past. The recent tariff wars started by US President Donald Trump have multiple precedents in the past. Late President Herbert hoover had imposed similar tariffs on 20,000 products imported into the US in 1930. The US economy was in severe economic condition in 1929 and all advisors had advised to the then president to impose the tariff to protect domestic US companies.

Result, by 1929, declining spending had led to reductions in manufacturing output and rising unemployment. Share values continued to rise until the October 1929 crash, after which the slide continued until July 1932, accompanied by a loss of confidence in the financial system. By 1933, the U.S. unemployment rate had risen to 25%, about one-third of farmers had lost their land, and 9,000 of its 25,000 banks had gone out of business. Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%; in the U.S., the Depression resulted in a 30% contraction in GDP. The great economic depression hit with full blow in 1930 and the recession lasted till 1939 ultimately concluding to start of World War 2 that ended in 1945. While this example is an extreme case of tariffs impact, it does serve as an example.

In the current situation, the countries have imposed swift & harsh reciprocal tariffs to US and Vise verse. If this situation continues into the future for next 60,90,120 days, it would have severe consequence on the global economy. But if the global leaders come to an agreement to an optimized solution, it will be business as usual. The learnings of the historic economic event should guide us to reach an agreement amicable to all parties. For this all need to work on WIN-WIN solution instead of WIN-LOSS proposition as seems to be currently happening. Although, the current situation may seems gloomy but it may turn around to a manageable outcome. And remember that one of the situations in which most money is made in the markets is Turn arounds.