Could the Dow Jones Crash 90% Again in 2025? Lessons from the 1930s Tariff Disaster

The stock market crash of 1929 and the subsequent 90% collapse of the Dow Jones Industrial Average by 1932 remains one of the most devastating financial disasters in history. A key factor in this economic catastrophe was the **Smoot-Hawley Tariff Act of 1930**, which triggered a global trade war, worsened the Great Depression, and sent markets into a freefall.  

Now, with rising geopolitical tensions, trade restrictions, and a potential return to protectionist policies, could history repeat itself in 2025? Let’s break down the risks, government policies, and whether another market meltdown is possible.  

How Tariffs Destroyed the Market in the 1930s

1. The Smoot-Hawley Tariff Act (1930)  

What it did. The U.S. imposed massive tariffs (up to 60%) on over 20,000 imported goods to protect American industries.  

The result. Global trade collapsed by 66%. as other countries retaliated with their own tariffs.  

Stock market impact. The Dow Jones, already down after the 1929 crash, fell another 50% in 1930 and kept plunging until it lost nearly 90% of its value by 1932.  

2. Why It Made the Great Depression Worse 

Bank failures Trade wars reduced corporate profits, leading to mass bankruptcies.  

Unemployment surge  Unemployment hit  25% as businesses shut down.  

-Global economic chaos. Europe defaulted on war debts, worsening the financial crisis.  

Could 2025 See a Repeat? Tariffs, Trade Wars, and Market Risks

1. Rising Protectionism in the 2020s

U.S.-China trade war  Since 2018, tariffs have been used as a weapon, with the U.S. imposing levies on $350B+ of Chinese goods.  

Biden’s new tariffs (2024). Increased tariffs on Chinese EVs, semiconductors, and steel.  

Global retaliation. China, EU, and others could respond with their own restrictions.  

2. Key Differences Between 1930 and 2025  

| Factor | 1930s | 2025 |  

| Global Trade | Collapsed due to tariffs | More diversified, but still fragile |  

| Central Banks | No Fed intervention (until later) | Fed & ECB can cut rates, QE, bailouts |  

| Market Safeguards| No circuit breakers, FDIC | Trading halts, deposit insurance |  

| Debt Levels | Low private debt, high defaults | Record government & corporate debt 

3. Will the Dow Crash 90% Again?

Unlikely to the same extreme, but a major correction (30-50%) is possible if

  Trade wars escalate dramatically (e.g., U.S.-China decoupling).  

  Interest rates stay high, triggering a recession.  

  Banking crises return. (like 2023’s SVB collapse).  

4. Government Policies That Could Prevent (or Worsen) a Crash 

✅ Preventive Measures  

Fed rate cuts & stimulus (like 2020’s COVID response).  

Avoiding extreme tariffs (learning from Smoot-Hawley).  

Stronger fiscal policies (infrastructure spending).  

❌ Risky Policies That Could Crash Markets  

Aggressive new tariffs  (sparking global retaliation).  

Deficit spirals (if U.S. debt reaches unsustainable levels).  

Geopolitical shocks (Taiwan conflict, oil disruptions).  

Final Verdict Will 2025 Be Another 1930?

While a 90% crash is improbable. due to modern safeguards, the risks of a severe market downturn are rising. If governments repeat the mistakes of the 1930s—escalating tariffs, ignoring debt risks, and failing to stabilize banks—we could see a 20-40% market crash.  

What to Watch in 2025  

Trade war escalations. (U.S. vs. China/Europe).  

Fed policy shifts (rate cuts vs. inflation fight).  

Debt crises (commercial real estate, sovereign defaults).  

The lesson from 1930? Protectionism backfires. If policymakers ignore history, markets could face another disaster—just not as extreme as the Great Depression.  

What do you think? Will 2025 see a major crash, or will the Fed and government prevent it? Comment below!

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