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How will tariffs impact your assets? And better yet, what can you do to protect your assets from the tariffs.

Our newsletter today is about how and why tariffs will affect you. There is a solution to protect assets, but first, a short lesson on the history of tariffs.

Some leaders never learn: Nero fiddles while Rome burns.

Part 1 – The Tariffs

To begin our story, we wind the clock back to the exuberance and wealth creation of the Roaring 1920s. In the US, people defied Prohibition, indulged in new styles of dancing and dressing, and rejected traditional moral standards. Jobs were plentiful, and the nation’s wealth more than doubled between 1920 and 1929. There was great optimism and economic growth fuelled by global trade in the US, and abroad.

During the 1920s the US government ran a trade surplus and had money to burn. And stock prices and wealth had nowhere to go but up – so everyone thought.

A big part of the success of this era was global free trade between nations. Businesses and consumers enjoyed imported goods costing less. Newly established businesses flourished, and new jobs were plentiful as they created US goods and services to export to other nations.

It was a win-win situation, and the above story was repeated across the world for those nations that participated in globalization.

Then Black Tuesday arrived. It was as though everyone woke up with a hangover at once. Panic set in. On October 24, 1929 the Great Crash became the most devastating stock market crash in the history of the US, and stockholders lost $199 billion in today's dollars. Images of investors leaping out of high-rise office windows covered the front pages of newspapers.

Consumer spending declined. Businesses cut back, and jobs were reduced. The economy was contracting as it went into the next phase, which is a normal function of business cycles.

In an attempt to tinker with the business cycle and help US jobs and businesses, two US Republican Congressman had the brilliant idea to place tariffs on imported goods. Senator Reed Smoot and Representative Willis Hawley sold Congress and President Hoover on promises of prosperity. As result, on June 17 The Tariff Act of 1930 became law, otherwise known as the Smoot–Hawley Tariff Act. The act placed tariffs on popular imported goods raising prices, forcing consumers to buy US goods which were originally more expensive than the price inflated imported goods with tariffs.  

Was the Tariff Act Successful?

At first, the tariffs seemed to be a success. Factory payrolls, construction contracts, and industrial production all increased sharply. However, larger economic problems loomed in the background.

Even before the Tariff Act was passed, President Hoover's office had received tariff protests from 23 trading partner nations, but the threats of retaliatory action were largely ignored.

After the tariffs were enacted, Canada, America's most loyal trading partner, retaliated by imposing new tariffs on 16 US products that accounted for around 30% of US exports to Canada. This was quickly followed by France and Britain, while Germany turned inward to a system of self-sufficiency.

Other nations quickly followed and retaliated against the US tariffs and placed tariffs on US imported goods into their country to protect their home markets. As US goods became more expensive in those countries, the demand for US goods plummeted. Protectionism spread fast and swift across the globe.

As local businesses cut back due to slacking demand, many business quickly failed and many more jobs were quickly lost. The economy went from bad to worse and the Great Depression of the 1930s took firm hold of the spirt of the nation. As a result of the Tariff Act of 1930, US businesses and jobs suffered far beyond what could have been a more normal, short-term, business cycle contraction. 

A very wealthy nation quickly turned inward and became impoverished in both wealth and spirit. Assets and fortunes were quickly lost as globalization was significantly cut back. Protectionism was now firmly in place.

The US and the world paid heavily for the 1930 tariffs and the ruthless destruction of life and property. 1932 stocks were worth only about 20 percent of their value in the summer of 1929 – a loss of 80%. By 1933, nearly half of America's banks had failed, and unemployment was approaching 15 million people, or 30 percent of the US workforce. It was little consolation thatboth Smoot and Hawley lost their Congressional seats during the following 1932 election.

The same sad financial story was occurring globally as a result of the tariffs and protectionism. Wealth and asset values dried up, and in many cases disappeared altogether. However, those that implemented asset protection measures in advance fared much better than those that did not.

And things got worse. Authoritative leaders, dictators and harsh regimes quickly sprung up across the world promising economic solutions to the desperate masses. World War II broke out lead by many of these same leaders. By 1945, the loss of life was over 60 million people – that’s 60,000,000 individual lives lost resulting from WWII - which was about 3% of the world population.

Over the years, the popular view among leading economists, business leaders, historians, and well-read leaders of the free world, is that the 1930 Smoot–Hawley Tariff Act was a leading cause of the Great Depression, which ushered in WWII. At a minimum, there is consensus that the passage of the Act greatly exacerbated the problems of the 1930s.

Part II – The End of the Tariffs

Following World War II, one of the core components of trade negotiations was to unwind the tit-for-tat tariff responses of the 1930s. During 1944 it was well understood that the tariffs contributed to a sharp reduction of trade, loss of jobs and failed businesses, bleeding economies, and much worse.

After WWII this new understanding supported a push towards multi-lateral trading agreements that would prevent similar situations in the future. Starting with the Bretton Woods Agreement of 1944, fresh global leadership focused on global free trade and foreign exchange. The goal was to recreate a global framework that had earlier broken down.

Bretton Woods was followed by a proposed International Trade Organization (ITO), and then the General Agreement on Tariffs and Trade (GATT). This served to create multilateral "most-favored-nation" components of global free trade reciprocity, and eventually the World Trade Organization (WTO) was formed to foster free trade, growth and raising standards of living across the globe. The positive benefits of globalization was restarted, and accelerated during the 1980s through 2008 following the advent of the Internet.

The good side of globalization is the efficiencies and opportunities open markets create. Business can communicate efficiently and effectively with their trading partners, suppliers, and customers, and manage better their supplies, inventories, and distribution networks. The end game is that it promotes more jobs and new businesses, enhances standards of living, and creates wealth. There are also many positive political, cultural, economic, and ethical consequences, as globalization helps promote international cooperation, cross-cultural awareness, and a sense of global civics.

However, it’s acknowledged that globalization has not been perfect for everyone. Particularly affected are the less educated blue color workers that fail to retrain or reskill as the world changes. In some cases whole industries and entire towns and communities suffered as they clung to the past.

The unequal sharing of the successes found in globalization created voter backlash in the US, and other places around the world. The most obvious is rooted in the election of the populist candidate Donald Trump, Brexit in the UK, and in various other forms around the world.

Does this mean we should unwind Globalization and reintroduce tariffs?

Part III – Nero Fiddles and Fire & Fury

A trade war hasn’t started yet, but it’s already escalating in terms of threats, counter threats and rampant chest pounding.

The early signs of protectionism actually began after 2001 as a knee jerk reaction to the September 11th attacks with the enactment of the Patriots Act, and its subsequent amendments. In the name of national security, these series of flawed laws placed harsh restrictions at the borders and limited individual rights, at home and abroad.

Protectionism was first acknowledged in November 2008 at the G20 Washington Summit as the Global Financial Crisis unfolded. I vividly recall listening to national leaders lecturing one another not to engage in protectionism measures as a defense to the GFC. The more these words were was spoken, the more it became clear that everyone wanted protectionism for their nation, but not for others to retaliate.

The nations that screamed the loudest became the biggest offenders. And the worst offense was the enactment of the 2010 Foreign Account Tax Compliance Account (FACTA). Andrew Quinlan from the Center for Freedom and Prosperity called FATCA "the worst economic idea to come out of Congress since Smoot–Hawley". Quinlan was correct, but little did he know things would get much worse.

Since 2010 there has been a passage of fresh US flawed laws to keep US citizens and US business’s money inside US borders. Most recently is the January 2018 TCJA (Tax Cuts and Jobs Act) with the little know hidden provisions affecting small foreign business owners and activities. During the past decade there were numerous civil, tax and criminal laws enacted designed to discourage cross border business and investments. While it is still legal to conduct investments and business across US borders, it’s important to get it right to avoid problems.

And finally, in March 2018, President Trump decides to ignore history and common sense and to implement tariffs to protect US jobs and businesses, in the name of ‘national security’. 

Nero fiddles while Rome burns.  

With the benefit of a little hindsight, even the nimblest of minds could see that it would be catastrophic to start a tariff war. The first mention of tariffs started kneejerk reactions. Even the threat of Trump’s steel and aluminium tariffs – well before enacted - caused the European Union to immediately respond by threatening tariffs on a whole series of US goods, like blue jeans, Harley-Davidson motorcycles, Kentucky bourbon, US steel, T-shirts, bed linen, chewing tobacco, cranberries, orange juice, and much more.  

In turn, Mr Fire & Fury replied that he would place tariffs on all European car imports. And China hasn't even started with its tariff announcments on US investments and US goods imported to China.

Some never learn.

The 1930s demonstrated how terrible tariffs wars can be for you, your assets, and even safety and security. Despite some short-term advantages, long term you and your assets will suffer.

What’s worse, global tensions are certain to rise, rival blocs will be formed, and shooting wars could ignite, reminiscent of the 1930s. Throughout history we’ve seen how economic grievances are the flames that fuel major wars.

It is amazing that anyone today in a position of leadership could be so ignorant of history that they would consider setting off another tariff war, or that it could possibly be won. Only a complete moron would think that tariffs are good for America, or the world, long term. With apologies, and no insult intended, to low IQ individuals by comparing them with such an irresponsible leader.

The Republican Congress knows tariffs are bad, most Democrats understand it, and most of Trump’s staff – at least those that are still around – certainly get it. But Mr Fire & Fury that knows everything, doesn’t have a clue, and no longer has the benefit of his seasoned, top economic adviser, Gary Cohn, who resigned over the tariffs.

Even a down and out gambler looks good when dealt a winning hand. But short-term luck quickly runs out. And the reality is that you never know when you’ve crossed the tipping point – going into wars, or at the table of fortune - until you see it from the rear view mirror.

Therefore, if you haven’t already, it is essential that you take action now to protect your assets.


Part IV - Protecting Your Assets

One common way to protect assets is to diversify them. Not just across asset classes, but across borders. Most smart investors avoid keeping all assets in one basket, so why would you hold all assets in one country? Why would you trust one individual – or one government, or one nation - to make good decisions that will protect you, your family, or your assets?

No one looks out for your best interests better than you. The steps you take today to protect your family and your assets will mean the difference in the years ahead. Are you willing to leave that to chance?

Already, global markets are preparing for the worst and moving out of US companies. According to State Street Global Advisors, February 2018 already saw significant fund outflows from US domestic equities. At the same time, international funds are attracting capital (SPDR Americas Research).

Significantly, an International Trust reaches across borders. It allows for far better opportunities for global investment diversification. It integrates estate planning in the years and generations beyond today. And it provides for superior asset protection planning than found domestically. Why would you keep all of your assets in the same jurisdiction that feverishly attacks your wealth?

With a little more planning an International Trust allows for better privacy. For many, it allows them to become a ‘sovereign individual’ with a little extra effort. And for some, to significantly reduce taxes to more reasonable levels.

There are many solid legal reasons why individuals successfully use an International Trust to protect their assets, and you can do the same. Don't gamble with the future.

Start Now:

To learn more, visit our site for complimentary Past Articles. Go here for International Trust Tips.

And the book How to Legally Protect Your Assets, 2nd edition, explains how you too can use an International Trust to accomplish your objectives. Offshore Living & Investing, 2nd edition, takes it to another level.

Both books are available at reduced prices right here at our web site in quality soft cover, pdf, or Kindle at

And if you’d like to discuss your planning objectives in a confidential initial review, contact me here.

But whatever you do, don't fiddle while Rome burns.

Until nest time…