The Legacy of the Smoot-Hawley Tariff Act

[Yavin4]

--On Edit-- I know that this the CATO institute, but I wanted to use a non-liberal source to make this point about tariffs. Share this with your MAGA family and friends when they talk about Trump's policies.

[JohnSJ]

1. Thanks for this history lesson

[Jim__]

2. When Reagan was proposing free-trade policies, he cited Smoot-Hawley.

I'm not an economist, but I don't think most economists agreed with him then. I don't believe most economists would agree with the CATO Institute today. Here's an excerpt from wikipedia article on Smoot-Hawley:

According to Paul Bairoch, the years 1920 to 1929 are widely described incorrectly as years in which protectionism gained ground in Europe. From a general point of view, the period before the crisis in Europe can be considered to have been preceded by trade liberalization. The weighted average of tariffs applied to manufactured products remained practically the same as in the years before the First World War: 24.6% in 1913, compared to 24.9% in 1927. In 1928 and 1929, tariffs were reduced in almost all developed countries.[25] Additionally, the Smoot–Hawley Tariff Act was signed by Hoover on June 17, 1930, while the Wall Street Crash occurred in the fall of 1929. Milton Friedman was of the opinion that the 1930 Smoot–Hawley Tariff did not cause the Great Depression. Douglas Irwin writes: "Most economists, liberal and conservative alike, doubt that Smoot Hawley had much to do with the subsequent contraction."[26] William J. Bernstein wrote:[27]

Between 1929 and 1932, real GDP fell 17% worldwide, and 26% in the United States, but most economic historians now believe that only one A minuscule part of that huge loss in both world GDP and US GDP can be attributed to tariff wars. ... At the time of Smoot–Hawley's passage, the volume of trade represented only about 9% of world economic output. If all international trade had been eliminated and no domestic use found for previously exported goods, world GDP would have fallen by the same amount: 9 percent. Between 1930 and 1933, the volume of world trade fell by between a third and a half. Depending on how the drop is measured, this equates to between 3 and 5 percent of global GDP, and these losses were partially offset by more expensive domestic goods. Thus, the damage caused could not have exceeded 1 or 2 percent of global GDP, or even close to the 17 percent drop seen during the Great Depression... The inescapable conclusion: Contrary to public perception, Smoot–Hawley did not cause, or even significantly deepened, the Great Depression.

Peter Temin explains that a tariff is an expansive policy, like a devaluation, since it diverts demand from foreign to domestic producers. He observes that exports represented 7% of the GNP in 1929, fell by 1.5% of the GNP of 1929 in the following two years and the fall was offset by the increase in domestic demand due to tariffs. He concludes that, contrary to popular argument, the contractionary effect of the tariff was small.[28]

I don't pretend to know what the best policy on tariffs would be right now. But I wouldn't take the arguments of free-market conservatives about Smoot-Hawley at face value.

[Yavin4]

3. FDR ran against Hoover in 1932 based on repealing the Smoot Hawley tariffs.

And FDR was no conservative.

[Xavier Breath]

4. Us Gen-Xers learned all about that particular act from an expert.

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