McKinley Tariffs as Economic Policy: A 'Suicide Mission,' Says Roth Capital Economist

Historical Precedents of Tariffs

• ⚠️ Modeling economic policy around the McKinley Tariff (1890-1894) or Smoot-Hawley Tariff (1930) is described as a 'suicide mission'.
• 📉 The McKinley Tariff period saw unemployment rise from 4% to 18%, with two stock market pullbacks, including a 30% bear market.
• 📉 The Smoot-Hawley Tariff is directly associated with the Great Depression, leading to the political downfall of its proponents.

Current Economic Challenges and Trade Policy

• 🎯 The US economy has historically relied heavily on consumer spending, with manufacturing being a smaller component, partly due to reliance on cheap Chinese imports.
• ❓ It's questioned whether current policies are addressing these long-standing economic imbalances.
• 📉 Tariffs are viewed with skepticism as a solution for trade deficits or the current account deficit, which are more closely tied to the balance of savings and spending/investment.

Broader Implications and Capital Attraction

• 💡 A broader program involving entitlement and tax reform might be necessary for significant economic shifts, but current indicators are not promising.
• ⚠️ The trade war is predicted to pound stocks and high asset prices due to a lack of a large US capital surplus.
• 🤯 The current approach to tariffs is described as 'insane', with shifting justifications and extreme proposals, such as imposing 50% tariffs on Canada unless they agree to become the 51st state.
• ⚖️ Concerns are raised about the administration's treatment of the Constitution and laws, which is seen as detrimental to attracting capital.
• 💰 The administration appears to be actively chasing foreign capital away, which is counterproductive given the need for massive capital to fund deficits and maintain asset prices.