Morgan Stanley sees Trump trade war Great Depression similarities

Thomas
Peter/Reuters

• With President Donald Trump’s trade war ramping up
  further, Morgan Stanley just said the US’s protectionist
  behavior reminded it of the conditions surrounding the Great
  Depression.
• Morgan Stanley is also worried about how the trade war
  will affect foreign direct investment, a slowdown in which
  could crush global economic growth.

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President Donald Trump‘s
latest attempt to strong-arm China appeared to fail Thursday, as
the nation’s Ministry of Commerce dismissed his threats as a
“carrot and stick” tactic.

The latest back-and-forth weighed on markets globally and renewed
concerns that the struggle would become a huge drag on economic
growth worldwide.

Morgan Stanley, one of many
global financial leaders warning of the potential for fallout,
went as far as to evoke the Great Depression in a recent
note to clients. The protectionist culture permeating trade
behavior reminds the firm of the downward spiral that worsened
the massive economic meltdown that rocked the US economy almost a
century ago.

The story goes like this: Following World War I, the US raised
duties on agricultural products in response to a steep decline in
exports. That tariff then spurred what Morgan Stanley calls an
“avalanche of protectionist punches and counter-punches,” which
created a more insular international situation ahead of the Great
Depression in 1929.

Then, in 1930, the US enacted the Smoot-Hawley Act, which raised
tariffs on more than 20,000 imported goods. The measure is widely
seen as …

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