Elected President of the Republic commitments as a means of support for expansive tariffs protecting Deterring US businesses and global competitors.
That description may include former President Donald Trump, but it also applies to Herbert Hoover, who led the country at the start of the Great Depression nearly a century ago.
A few months after the stock market crash, Hoover signed into law the Smoot-Hawley Tariff Act, a 1930 measure that increased tariffs on a wide range of imported goods. In response, several countries imposed it retaliatory tariffs and trade declined. Many economists see the measure as a contributing factor to the nation’s economic downturn.
“After World War II an entire generation of Republicans and Democrats were deeply conditioned against tariff increases because of their experience in the 1930s. Now we have a new generation of leaders who are much more willing to initiate higher rates,” Douglas Douglas. Irwin, an economics professor at Dartmouth College and author of “Peddling Protectionism: Smoot-Hawley and the Great Depression,” told ABC News.
Here’s what to know about the Smoot-Hawley Tariff Act, its economic impact and what its legacy means for Trump’s proposed tariffs, according to experts.
What is the Smoot-Hawley Tariff Act?
The Smoot-Hawley Tariff Act came at a time of economic crisis.
As the stock market wobbled and financial panic set in, Congress negotiated a series of tariff hikes that were initially aimed at protecting US farmers from foreign competition, but eventually extended to a wide range of manufacturing.
The measure is named after its main advocates in Congress: Republican Senator Reed Smoot of Utah and Republican Willis Hawley of Oregon. It passed the Senate by a narrow margin of 44 to 42, and passed the House of Representatives by a vote of 264 to 147. Hoover signed Smoot-Hawley in June 1930.
For products already subject to tariffs, the law raised the average import tax from 40% to nearly 60%, an increase of about 20 percentage points, according to Kris Mitchener, an economics professor at Santa Clara University who studies Smoot-Hawley. , said ABC News. It also significantly expanded the number of goods subject to a tariff, he added.
“Pretty much the entire tariff schedule ended up in a rewrite,” Mitchener said, referring to the nation’s tariff code.
What happened after Smoot-Hawley went into effect that caused the Great Depression?
The Smoot-Hawley tariffs created an almost immediate trade war in which many foreign nations responded to the tariffs by slapping their own taxes on US imports.
For example, Canada imposed tariffs on 16 products that accounted for a third of US exports, according to one. working paper Mitchener wrote in 2021. France and Spain both slapped tariffs on imported American automobiles, an important US industry.
“America’s trading partners responded by targeting U.S. exports,” Mitchener said. “The most important declines were in the targeted products.”
As a result, trading partners suffered production cuts, but so did the United States, Michener said.
Herbert Hoover 31st President of the United States.
Central Press/Getty Images
The trade slowdown weakened the economy and deepened the nation’s economic recession, experts said. However, the Great Depression took hold before the Smoot-Hawley conclusions, ruling it out as a cause of the crisis, they added.
“Smoot-Hawley impacted the U.S. economy at a vulnerable time,” Irwin said.
What does the legacy of Smoot-Hawley mean for Trump’s tariff proposals?
Smoot-Hawley overshadowed tariff policy for decades, Irwin said. “He gave tariffs a bad name,” he added.
For decades, prominent members of both major parties focused on the dangers posed by tariffs, occasionally citing Smoot-Hawley, Irwin said.
“The Smoot-Hawley tariffs sparked an international trade war and helped sink our country into the Great Depression,” then-President Ronald Reagan said in a 1986 radio address.
The measure played a key role in shifting tariff authority from Congress to the executive branch as lawmakers sought a quick way to roll back tariffs, experts said.
In 1934, the Reciprocal Tariff Act empowered the president to raise or lower tariff levels by up to 50%. A series of subsequent laws helped shift additional tariff authority to the president.
“Right now, Congress doesn’t have much to do with imposing tariffs,” Irwin said.
On the campaign trail, Trump said he could impose tariffs without the help of Congress. He is largely accurate in his description of the president’s wide latitude to set and implement some tariffs, experts say. previously told ABC News
“Trump is using delegated powers to pass tariffs,” Irwin said. “That’s sort of completing the Smoot-Hawley circle.”
