The Blubber

Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School, described President Donald Trump’s tariffs as the “biggest policy mistake in 95 years.” He was referring to the Smoot-Hawley Act of 1930, a protectionist measure that many economists believe deepened the Great Depression.

“I don’t understand why Trump didn’t learn the lesson of Smoot-Hawley,” Siegel said Friday on CNBC. He argued that Trump’s tariffs could be even more damaging because international trade plays a far larger role in the global economy today than it did in the 1930s.

The announcement of the tariffs and the rising risk of a global trade war have rattled financial markets. The S&P 500 dropped nearly 5% on Thursday, and losses continued into Friday morning, with all three major U.S. indexes in decline. Analysts widely criticized the tariffs. Dan Ives of Wedbush called them “worse than the worst-case scenario,” while JPMorgan raised its estimated chance of a global recession to 60% in a note titled “There will be Blood.”

Although Siegel said he is staying invested due to his long-term strategy, he warned that traders should brace for volatility as long as the tariffs remain in place.

After Trump announced a new 34% tariff on Chinese imports on Wednesday from the White House Rose Garden, China responded with its own 34% tariff on all U.S. goods. Siegel described the situation as a “nightmare” and said it could encourage further retaliation from other countries. He echoed other economists who view the tariff policy as a self-inflicted economic wound.

However, Siegel noted that while Trump may not have learned from past mistakes, he believes the Federal Reserve has. He expects the central bank to respond to the economic shock by cutting interest rates. “I think they have to lower interest rates as a result of this global shock,” he said, adding that inflation is likely to rise.

Fed Chair Jerome Powell had previously acknowledged in March that tariffs could contribute to inflation but suggested the effect might be temporary. At the time, the Fed left interest rates unchanged. Siegel didn’t expect a rate cut in May, but after the latest round of tariffs, he now sees a significantly higher chance of a reduction.

Still, in Powell’s first public comments since Trump’s recent tariff announcement—dubbed “Liberation Day” by the president—he acknowledged that the impact of the levies on prices and economic growth may be more significant than previously thought. However, the Fed’s cautious approach remains unchanged for now.

Meanwhile, Trump is pushing for action. On Friday, he urged Powell to cut rates in a post, writing: “He is always ‘late,’ but he could now change his image, and quickly… CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”