A History Lesson
A History Lesson
March 9, 2026
Clients of the Firm,
William Faulkner penned, “The past is never dead. It’s not even past.”
Trade policy in America has a way of circling back on itself as well. The names change, the legal hooks shift and the targets rotate, but the underlying tension between protection and leverage remains. This note will focus on the extent to which historical economic and political frameworks remain relevant in the current period. However, we will first touch on the impact of the Iran war in this context.
The Iranian Conflict
The oil shock because of the current conflict with Iran in the Middle East continues to move markets. Militarily,, the war will likely result in regional realignment, the form of which is highly uncertain. From a financial perspective, previous periods of instability in the Middle East created oil price shocks that were largely transient excluding the Arab oil embargo of the 1970’s. The former episodes manifested as periods of asset decline that corrected in weeks or months. The latter was a notable exception ushering in stagflation that persisted for several years. Today, conditions on the ground, in terms of the transfer of fuels and the availability of alternative fuel sources in Russia and the United States, are significantly different than the 1970s. Thus, we may expect a different outcome than that period. To be clear, we cannot predict with any degree of certainty how that will manifest at this time.
Tariffs
Another headwind to markets is tariffs. What makes the President’s proposed new 15% tariff regime different from the earlier rounds is not simply the rate. It is the mechanism, the scope, and most importantly, the clock.
Previous justifications for tariffs leaned heavily on Section 232 (national security) and Section 301 (unfair trade practices). Steel and aluminum tariffs were justified under national security. China tariffs were framed as a response to intellectual property violations. These were largely country or sector specific actions with quasi-permanent features. Markets debated escalation and exemptions, but not expiration.
The new proposal to impose a blanket 15% tariff under Section 122 authority is a different animal. Section 122 of the Trade Act of 1974 allows the President to impose temporary across-the-board tariffs of up to 15% for up to 150 days to address balance-of-payments problems or dollar pressures. It is explicitly time-limited and is designed as a pressure valve, not a structural realignment. That statutory ceiling, 15% and 150 days, is not incidental, but is the key. The old tariffs were a campaign of attrition. The new 15% tariff would function more like a shot clock.
Under Section 232 and 301, the Administration had to investigate, justify, and then endure legal and diplomatic pushback. The measures were targeted and legally durable, but slow-moving. Under Section 122, the President can move quickly and broadly. The tariff is universal rather than surgical. It does not single out steel or China, but hits everything that crosses the border, at least temporarily. That breadth changes the negotiating dynamic.
A country-specific tariff allows other partners to sit back and watch. A universal 15% tariff forces everyone to the table at once. Allies and adversaries alike would face the same immediate incentive: negotiate relief before the 150-day window closes — or risk the White House escalating through other authorities once the temporary period expires.
Because Section 122 cannot extend indefinitely, it creates a natural deadline for bilateral or plurilateral trade deals. Congress would need to act to prolong the measure. Alternatively, the Administration would need to pivot to other statutory tools if negotiations stall. Either way, the clock disciplines both sides. Foreign governments would know the tariff is not a new steady state; it is leverage with an expiration date.
In contrast, the earlier tariffs often felt open-ended. The uncertainty lay in how high they might go, not how long they might last. Supply chains adjusted around them. Firms rerouted production to Vietnam, Mexico, or elsewhere. Investors priced in permanence. A universal 15% tariff with a statutory sunset is less about reshoring per se and more about extracting concessions quickly (i.e. market access, currency commitments, procurement reforms, or digital trade rules).
Markets, of course, will focus on inflation as a blanket 15% tariff is economically different from targeted product duties. It will ripple through consumer goods, intermediate inputs, and capital equipment simultaneously. The pass-through could be broader and faster. However, the temporary nature complicates the calculus. Businesses may hesitate to reprice aggressively if they believe relief is coming within months. That ambiguity is both destabilizing and strategic.
Politically, the contrast is just as stark. The old tariffs were framed as responses to specific bad actors. A universal 15% tariff reframes trade as a systemic imbalance. It is less about punishment and more about renegotiation at scale.
Whether that strategy succeeds depends on execution. A ticking clock can concentrate minds, or it can invite brinkmanship. Trading partners may test whether Congress will tolerate higher prices. Domestic industries may lobby for exemptions that dilute the leverage. The White House would need to sequence talks rapidly to avoid turning a temporary measure into prolonged uncertainty.
The wager behind the 15% proposal is that American market access remains valuable enough, and the deadline credible enough, to force meaningful concessions before the clock runs out. The old tariffs tested endurance. These will test urgency.
The Napoleonic Corollary
Recently, I have been reading the book, History of the Modern World, the 1956 printing. I find that reading history books closer to the time period in which they cover tends to more accurately reflect the perspective of the period. Specifically, there is a large portion of the book that focuses on the French Revolution and the subsequent rise and fall of the Emperor Napoleon. When I consider Napoleon Bonaparte, I am struck less by the drama of his military campaigns than by the political and economic architecture he constructed in the wake of revolutionary chaos. Napoleon did not merely seize power militarily; he attempted to stabilize it economically and institutionally. In doing so, he laid down patterns of economic governance that continue to shape modern countries, including the United States. Napoleon’s authority rested on his ability to restore order, discipline public finance, and align economic institutions with national power. These same objectives remain visible in U.S. economic and political policy today.
Napoleon emerged from a France exhausted by inflation, debt, and institutional collapse. The French Revolution had dismantled the old order but failed to replace it with a stable economic system. As the authors of the book Palmer, Colton, and Kramer observe, Napoleon “offered order, security, and efficiency after a decade of upheaval.” This formulation could just as easily describe moments in modern American history when crisis was used to justify expanded federal authority. During the Great Depression, World War II, 9/11, the financial crisis of 2008, or the economic disruptions of COVID and today, economic instability created public tolerance for centralization and government economic intervention in exchange for predictability of work and the stability of the price of assets.
One of Napoleon’s most consequential reforms was the establishment of the Bank of France in 1800. Designed to “regulate credit and stabilize the currency,” the bank functioned as an intermediary between state authority and private capital. While the institutional details differ, the logic closely resembles that of the U.S. Federal Reserve. In both systems, monetary policy is insulated from day-to-day politics while remaining fundamentally aligned with state objectives: price stability, employment, debt management, and crisis response. Napoleon understood that control over credit was as essential to sovereignty as control over territory, a lesson modern American policymakers have clearly absorbed. This was evidenced more recently in Fed intervention in COVID and during the GFC providing liquidity facilities for many types of debt, a clear foray into public asset prices and market liquidity.
Napoleon’s economic vision extended beyond domestic stabilization to international competition. The Continental System, his tariff attempt to exclude British goods from European markets, represented an early effort to weaponize trade. Quoting again, this policy sought to “mobilize Europe’s economy in the service of French dominance.” The ambition was bold. The execution was less than ideal. Smuggling flourished, allies resisted enforcement, and French consumers bore rising costs. The failure of the Continental System is instructive precisely because it mirrors the limits of contemporary U.S. tariff policy.
Modern American tariffs, particularly those aimed at strategic rivals, similarly promise domestic revitalization while often producing higher consumer prices, retaliatory trade measures, and supply-chain distortions. Like Napoleon’s blockade, today’s tariffs reveal the difficulty of imposing economic nationalism in an interconnected global system. Power can influence markets, but it cannot fully command them. As U.S. tariff policy unfolds, it is possible we will see the limits of this imposition either from international or domestic pushback.
Yet the comparison has limits. Napoleon ruled through decree, censorship, and coercion. Political participation was sharply constrained, and economic discipline was enforced from above. The United States, by contrast, operates within a democratic framework, however imperfect or tested at times, where economic policy is contested through elections, courts, and public debate. Importantly, the U.S. has three separate branches of government versus an imperial system. Still, Napoleon’s story offers a cautionary insight described as one who “preserved the Revolution’s social gains while ending its political freedoms.” That paradox resonates uncomfortably in the modern American context, where expanded economic intervention often coincides with concerns about executive power, civil rights, surveillance, and institutional overreach.
In the end, Napoleon’s rise and economic policies illuminate a broader truth about modern governance. States confronted with instability tend toward centralization, technocratic control, and the strategic use of economic power. The United States is no exception. While separated from Napoleonic France by ideology and constitutional form, it shares a common logic: economic order is treated as a prerequisite for political legitimacy and global influence. It seems Napoleon’s legacy is not confined to the nineteenth century. It lives on wherever governments seek to master markets in the name of national survival.
Conclusion
The rhyming of history Samuel Clemens noted can help us evaluate crisis response, adjudication and outcome. While not completely predictive, history lessons (both good and bad) help us to form a strategic framework when it comes to money management. One core thesis to consider is that governments with central intervention capability (i.e. central banks and strong militaries) will tend to attempt to use those capabilities to further their economic and political interests. In this century, crisis intervention occurs rapidly. We saw this speed with TARP in 2008, Fed intervention in COVID and are currently seeing it with discussion of oil market intervention from Europe and the U.S. strategic reserves. Asset prices move just as quickly in response to these interventions.
In addition, the speed and magnitude of intervention can inform recovery timing and slope. The cross currents of macro headwinds, tariffs, private credit weakness and war, with the cyclical tailwinds of AI spend and tax cuts make for a very dynamic market. Which wind blows the hardest may indeed dictate the mid-term progress of forward history. Our task is to navigate that future, informed by the past and not naïve to current government constructs shaped by that past that may play a supportive role in asset prices.
We appreciate the opportunity to serve you and your families.
Sincerely,
Peter Wernau
CEO
Wernau Asset Management
30 Western Ave, Suite 206
Gloucester, MA 01930
Direct: 978-325-6049
Important Legal Disclosure
This letter contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Wernau Asset Management, Inc. ("Wernau Asset Management) is a registered investment adviser with its principal place of business in the Commonwealth of Massachusetts. Wernau Asset Management and its representatives are in compliance with the current registration requirements imposed upon registered investment advisers by those states in which Wernau Asset Management maintains clients. Wernau Asset Management may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. This letter is limited to the dissemination of general information pertaining to its investment advisory services. Any subsequent, direct communication by Wernau Asset Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Wernau Asset Management, please contact Wernau Asset Management or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov). For additional information about Wernau Asset Management, including fees and services, send for our disclosure statement as set forth on Form ADV from Wernau Asset Management using the contact information herein. Please read the disclosure statement carefully before you invest or send money.