With the Dow Jones stock market index at about 47,000 it is interesting to see how far it has come since May 7, 1929, when it hit a high of 326 for the 1920s. But just a half a year later on November 8 its value fell to 198.
The Great Crash of 1929 wiped out $50 billion which was half the entire $100 billion GNP for the country.
The answer to our problem was simple, said Congress. All we needed was tariffs, so on June 17, 1930, President Hoover signed the 60% worldwide tariffs called for by the Smoot–Hawley Act.
What happened next was a severe economic contraction also close to 60%. By November 1930 unemployment went from 3,000,000 to 8,000,000 workers, 25% of all factory workers were laid off and 1,300 banks failed.
By September 30, 1931, the Dow was down to 99 – by June 1932 the S&P was off by 86.2% from its high.
Another 10,000 banks failed by 1932 and unemployment was 13,000,000 or 29% of the labor force.
The Great Depression was made worse by the trade war and tariff retaliation by other countries because of our big beautiful tariffs. By 1934 under President Roosevelt, the rates were cut in half and the economy began to grow again.
This lesson in historical reality is why Congress should be in no rush to enact tariffs, which are really just a tax on imported goods.
Last year America’s consumers and businesses paid nearly 90% of the cost of President Trump‘s tariffs according to a recent report from the federal reserve Bank of New York. The nonpartisan Tax Foundation said that equated to a “tax increase of $1,000 per household in 2025.”
A party that for years has said “Read my lips, no new taxes” can’t now support a 15% tariff tax on the world.
Candidates for office will have to say whether they are Republicans In Name Only because they support the 10 or 15% import tax or if they are traditional anti-tax conservatives in the Republican Party. You can’t be both.
Because MAGA “loves Trump’s policies” we may need to form an anti-tax conservative party that follows core principles, not a cult. Maybe we can even call it the Republican Party again?
Chuck Douglas is a former Republican U.S. Congressman for NH District 2 who resides in Hopkinton.