The Smoot-Hawley tariff on average raised import duties by 15 percent on hundreds of goods, according to an estimate by Douglas Irwin, professor of economics at Dartmouth College. The Great Depression, which deflated prices as consumers and businesses cut spending, raised the de facto duties by an additional 30 percent, according to Irwin’s calculation.
Originally intended by Republicans to assist struggling farmers, the Smoot-Hawley Tariff Act was expanded to cover the interests of a motley group of industries as it was shepherded through Congress. It earned “eternal notoriety as an ill-timed piece of legislation that reflected special-interest logrolling run amok,” Irwin wrote in his 2017 book, “Clashing Over Commerce: A History of US Trade Policy.”
Trump has described the Smoot-Hawley tariff as a belated attempt to save the U.S. economy from the Depression, which could have worked had it been rolled out earlier. The assertion hasn’t won over too many economists, many of whom say the tariff didn’t help because it stifled global trade.
It took just a few years for the Smoot-Hawley tariff to worsen the Depression.
U.S. exports shriveled to a third of their pre-Smoot-Hawley levels, according to the State Department, as the taxes prompted European countries to impose retaliatory tariffs. World trade declined by some 66 percent from 1929 to 1934, according to the State Department.
Reflecting the growing pessimism about the state of the U.S. and global economies, the Dow Jones Industrial Average sank from around 220 points in June 1930 to below 50 points by June 1932. It wasn’t until 1950 that the index climbed back above 220.
“Economists agree that the collapse in trade made the Depression worse,” Mitchener said. “It wasn’t just the Smoot-Hawley tariff war that took place. Countries retreated from open markets, in general, and began to put restrictions on imports across all their trade partners — not just the U.S.”
As the Depression wore on, American voters quickly became disenchanted with the Smoot-Hawley tariff. The Republican Party lost 52 seats in the House in the 1930 midterm elections and 101 more in the 1932 elections.
Smoot, Hawley and Hoover, meanwhile, were all voted out of office in 1932.
It’s unclear whether any farmer or industry benefited from the 1930 Smoot-Hawley tariff, Irwin said. Whatever good that was derived from the tariff was probably “drowned out” by the costs of the tariff, he added.
Trump’s proposed tariffs would have a much larger impact than that of the Smoot-Hawley Tariff Act on the U.S. and global economies, economists said.