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In the early 1930s, during the onset of the Great Depression, two prominent Republicans, Representative Willis Hawley from Oregon and Senator Reed Smoot from Utah, believed they had found a solution to protect American farmers and manufacturers from overseas competition: tariffs.
President Herbert Hoover endorsed the Smoot-Hawley Tariff Act in 1930, despite warnings from various economists that such measures would likely trigger retaliatory tariffs from other nations. This prediction materialized, contributing to a deeper economic downturn that the United States would not recover from until World War II.
While most historians regard Smoot-Hawley as a grave error that exacerbated an already dire economic situation, a new perspective on tariffs has emerged, particularly with former President Donald Trump advocating for their resurgence.
Similar to Trump, Hoover was elected largely on the strength of his business credentials. As a successful mining engineer and humanitarian, he entered the White House in 1929 with a dynamic agenda aimed at fostering economic growth through collaboration between the public and private sectors.
In his inaugural address, Hoover famously stated, “Anyone not only can be rich, but ought to be rich,” as he called for a special congressional session to discuss supporting U.S. farmers through “limited changes of the tariff.”
However, he soon found himself grappling with the stark challenges posed by the Great Depression.
Trump, who has proposed his own set of sweeping tariffs, argues that steep import taxes have historical precedence as a foundation of the U.S. economy. In his view, the abandonment of such tariffs began with the introduction of the federal income tax in 1913, asserting that, “in 1929, it all came to a very abrupt end with the Great Depression,” suggesting that adherence to past tariff policies could have averted the economic disaster.
In reference to Smoot-Hawley, Trump remarked, “They tried to bring back tariffs to save our country, but it was gone. It was gone. It was too late,” highlighting his belief that it resulted in irreversible economic consequences.
Contrary to Trump’s claims, the U.S. maintained a substantial level of high tariffs long after 1913. Gary Richardson, an economics professor at the University of California, Irvine, points out that high tariffs historically aided in industrial growth within the U.S. However, he cautions that the trend shifted as the country advanced technologically and began to view high tariffs as less beneficial.
After World War II, the U.S. advocated for low tariffs globally, believing it was in their best interest, an approach that has been reconsidered in recent times.
The origins of U.S. tariffs can be traced back to the Tariff Act of 1789, the first major legislation passed by Congress, which set a 5% tax on numerous imported goods, serving both as a means for generating government revenue and as protection against foreign competition.
Following the War of 1812, further tariffs were enacted in 1817 to safeguard domestic industries, particularly textiles, from cheaper foreign imports.
For years, high tariffs were a consistent policy, particularly as the government sought to increase revenue and manage debt accrued during the Civil War.
The Tariff Act of 1890 significantly elevated taxes to 49.5% on thousands of items, a move spearheaded by the protectionist William McKinley. However, these high tariffs resulted in increased prices and contributed to an economic downturn, significantly worsening during the Panic of 1893.
Although a national income tax wasn’t permanently established until the 16th Amendment was ratified in 1913, subsequent economic growth was seen, largely driven by technological advancements and consumer spending following World War I.
This robust period, known as the “Roaring Twenties,” featured a substantial rise in the stock market, climbing from 63 points in August 1921 to nearly 400 points by September 1929.
Cities experienced rapid urbanization and technological innovation flourished, even as agriculture remained vital to the nation’s economy. Though working conditions were often difficult, the quality of life improved for many in the middle class, who welcomed new inventions, including radios and washing machines.
Tariff policy persisted, with the Fordney-McCumber Act of 1922 instituting the highest tariffs in U.S. history, aiming to further bolster domestic manufacturing. This policy led to retaliatory tariffs from major trading partners, mirroring recent global responses to Trump’s tariffs.
As the Federal Reserve began increasing interest rates in 1928, the economy’s expansion began to stall. The intention was to temper a stock market bubble, but this strategy inadvertently raised interest rates abroad, dampening international consumer spending and instigating a U.S. recession by mid-1929.
The onset of the Great Depression was marked by “Black Tuesday” on October 29, 1929, when mass panic led to a catastrophic stock market crash, devastating countless investors. Consequently, as consumer demand plummeted, manufacturing output slowed, prompting widespread layoffs and factory closures.
In the ensuing years, unemployment soared to 25%, and economic production shrank by nearly 30%. The nation was wracked with bank failures and numerous business bankruptcies, resulting in millions of Americans losing their homes.
Hoover’s life story starkly contrasted that of Trump. Orphaned at a young age, Hoover had a notable career as a humanitarian leader during World War I before becoming the Secretary of Commerce. Although he thrived in small group settings, he often appeared more reserved in front of larger audiences.
As noted by David Hamilton, a history professor at the University of Kentucky, “There’s no theater to Herbert Hoover.” Believing in the importance of protective tariffs for farmers, Hoover prioritized facilitating the production of new crop varieties and viewed higher tariffs as compatible with international trade, differing sharply from modern perceptions of trade as a zero-sum game.
Hawley, who chaired the House Ways and Means Committee, initially focused on agriculture but ended up supporting a bill that significantly increased protections for the manufacturing sector as well. This legislation successfully passed the House in May 1929.
Senator Smoot, leading the Senate Finance Committee, facilitated the bill’s passage in March 1930. The resulting Smoot-Hawley Tariff Act was finalized and approved by Congress in June of the same year.
Despite pressure from over 1,000 economists urging a veto, Hoover signed the act, acknowledging the complexities of tariff legislation, stating, “No tariff bill has ever been enacted, or ever will be enacted, under the present system that will be perfect.”
This situation stands in stark contrast to Trump, who rose to prominence in real estate and entertainment prior to his presidency in 2016, advocating for tariffs as a means to bolster domestic economies at the cost of foreign trading relationships. Trump has often taken unilateral action on tariffs, citing an “economic emergency” to circumvent Congress.
The Smoot-Hawley Act elevated import tariffs by an average of 20% on a vast array of goods, igniting retaliatory responses from many key trading partners. This decline in international cooperation on both trade and defense matters fostered an environment that contributed to the rise of authoritarian regimes, including the ascent of Adolf Hitler, according to Richardson.
“While certain sectors saw profitability, overall, the impact of Smoot-Hawley was detrimental both for Americans and populations globally,” Richardson contended.
The repercussions of the tariffs led to diminished foreign markets for U.S. products and further reduced economic activity. Both Smoot and Hawley faced electoral defeats in subsequent years, as voters turned to Franklin D. Roosevelt, who decisively defeated Hoover in the presidential election.
In the years that followed, Smoot, Hawley, and Hoover continued to defend their tariff strategies, often attributing America’s economic difficulties to international trade policies and external monetary factors. The recovery of the U.S. economy would not begin in earnest until the demands of World War II gave a significant boost to production and employment in 1939.
Hoover famously remarked in December 1930 that “economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body — the producers and consumers themselves.”
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