From the Great Wall to the Markets

Dear Traders,

What an extraordinary market we are witnessing. Yesterday, the U.S. GDP numbers were released, and for the first time since 2022, the U.S. economy contracted.

The market gapped down, and even President Trump himself attributed the downturn to the previous administration’s policies. However, the gap was quickly reversed, and surprisingly, the U.S. recession lasted a mere 37 minutes!

As I write this from a mountain resort near the Great Wall of China on Thursday evening (Thursday morning in New York), the market has rebounded impressively, gaining another 2%. Microsoft and Meta are leading the earnings season, and even NVDA, once considered the darling of investors, has surged over 5%.

No one truly knows what is happening, and it seems everyone is scratching their heads. Undoubtedly, the financial markets remain impossible to predict.

While in China, I had the opportunity to read an intriguing book, Peddling Protectionism: Smoot-Hawley and the Great Depression, which examines how American tariffs in 1930 impacted the U.S. economy and economies worldwide. Published in 2011, this book is far from the current political landscape we are witnessing under President Trump’s global trade war.

The similarities are fascinating. The movement to protect American farmers was led by William Jennings Bryan, a prominent figure from the western farming state of Nebraska. Bryan was a dominant force in the Democratic Party, running three times as the party’s nominee for President in 1896, 1900, and 1908. His message was: It is important to “grow” things in the USA.

In 1928, Republicans decided to run on the agriculture protectionism platform and crafted a plan to gain the farm vote by raising duties on agricultural imports. Industrialization has been impacting agricultural workers, and more and more farmers have been struggling. President Hoover took office, and just weeks after his inauguration on March 4, 1929, Congress introduced legislation mandating steep tariffs.

After a year of deliberation, spearheaded by Congressmen Reed Smoot and Willis Hawley, the Smoot-Hawley Tariff Act of 1930 was passed, imposing massive duties on thousands of agricultural products. It became one of America’s most infamous trade laws.

In Canada, one of the U.S.’s largest agricultural partners, nationalism and anti-American sentiment grew. This provided an opening for Conservative politician R.B. Bennett to launch a dynamic 1930 election campaign, promising fiscal retribution against the U.S., economic independence, and a strategy to “blast” Canada into other markets. No one predicted it, but Bennett became prime minister and quickly escalated the trade war with retaliatory tariffs.

It is fascinating how these events resonate with the recent 2025 Canadian federal election. Just a few months ago, the governing Liberal Party (similar to the U.S. Democratic Party) was trailing in the polls.

However, the trade wars and President Trump’s perceived threats to Canadian sovereignty (whether as a joke or not) galvanized the Liberal Party’s campaign. The party elected technocrat banker Mark Carney, a non-political figure, as its leader, and decisively defeated the Conservative Party so badly that the Conservative leader lost his own riding in Parliament.

Who knows whether President Trump orchestrated this deliberately, with a larger plan for Canada and the region, or if it was simply a joke that he kept doubling down on?

Only time will tell.

Another intriguing similarities between the Smoot-Hawley Act and President Trump’s actions is the recent push to protect U.S. manufacturing jobs. The message this time is clearly this: It is important to “manufacture” things in the USA.

The book concludes that economists and historians largely view the 1930s Act as a policy misstep, serving as a cautionary tale against any form of protectionism. It was later followed by softer and more liberal trade agreements, such as the Reciprocal Trade Agreements Act of 1934.

While it’s interesting to reflect on what happened in the past, it’s important to remember that history doesn’t always repeat itself. The global economy has undergone significant changes. We’ve experienced World War II, the Cold War, and the evolution of the modern trade order. Therefore, it would be overly simplistic to assume the outcome of the Smoot-Hawley Act will happen again.

Of course, debates on this topic are abundant on YouTube, and no book or newsletter can provide a definitive answer. Only time will tell if these policies succeed or falter, but I’m grateful to be living through and learning from this fascinating period.

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Lastly, I apologize for the poor internet connection here in China, which caused me to miss several trading days. I’ll be back in the Vancouver office soon and plan to trade more actively.

For now, I’m at the Great Wall of China and will be running for the next two days before flying out of Beijing.

To your success,

Andrew