Evening star., 1930-06-17
Tariff and the Stock Market.


The coincidental announcement by
President Hoover that he would sign
the Smoot-Hawley tariff bill and the
break in prices on the stock market
have been linked in many of the news
paper reports as cause and effect. Most
Of these newspapers, however, are listed
among those which have for weeks at
tackled the tariff bill, either because
their political views have been antago-
nisttc or because many of their large
advertisers, importers, international
bankers, have been bitterly opposed to
any increases in the tariff More i'm
partial consideration of the situation
out of which grew the new break in
stock prices yesterday, however, assigns
a number of reasons for the decline
For example, there has been a tendency
toward lower prices for the last six
weeks. Further, the bear raids on the
market have been successful, and the
bears doubtless seized on the dislike of
the tariff bill, widely advertised in some
quarters. to continue their raids yester-
day. The psychology Of the market sit
uation also tended to o continued
lowering of prices.
The tariff bill, if the supporters of
the protective tariff theory are correct,
is designed to give American producers
a better break with their foreign COM
petitors in the American market. That
has been the purpose of other protective
tariff laws. The proof of the present
tariff will be in the manner in which
1t operates on American industry. If
American producers both of agricultural
and manufactured products find that
they can compete to better advantage
with foreign products, that their market
in this country is more safely protected,
and that they can afford to pay labor
good wages and dividends to their stock
holders, the bill will have justified it
self. The earning power of American
industry and its productive power are
to be considered rather than the antics
of stock gamblers on the New York Ex-
change. 1t is too early to say what the
effect of the new tariff law on Ameri-
can business will be. The same criti-
cisms have been raised of other tariff
laws that have been registered against
the new bill so soon to become a law.
America in recent years lost its head
and made stock gambling a major in
dustry rather than actual production
upon which values were to be based.
The inevitable crash came in the Fall
of 1929. And when it came public con-
fdence was greatly undermined. Be-
cause Of the fictitious values built up
by the gamblers, psychology had been
developed that looked only to the spend
ing Of money rather than the produc-
ton of goods. The stock market had
failed to represent correctly the true
situation with regard to business and
industry. The crash in the market
could not fail to bring further trial
and tribulation to legitimate business.
The process Of rebuilding is not an
overnight matter. Nor is 1t to be ex-
pected that the mere passage of this
or any other tariff bill would cause an
immediate betterment in the situation
Had President Hoover announced he
would not sign the tariff bill, doubtless
the same depression in stock prices that
took place yesterday would have taken
place. Probably 1t would have been
even more severe. The final DISPOSE
ton of the tariff should have a bene-
flcial effect in the end. American busi-
ness will now know where it stands
after being kept in suspense for a year
and a half. This goes for the import
ing business as well as for the manu-
featuring. If business grows better,
even slowly, under the new law, it will
have proved its value From a political
point of view, the opposition to the
Republican administration would be
much grteved should times improve.
The opposition's main chance of sue
cess at the polls next November lies in a
continuance of slack times and In
further depression.