What is the Smoot-Hawley Tariff Act? The 1930 tariffs didn’t age well

• The Smoot-Hawley Tariff Act of 1930 raised tariffs on foreign goods, triggering a global trade war that economists believe deepened the Great Depression.
• President Donald Trump’s recent tariff policies have drawn comparisons to the Smoot-Hawley Tariff Act, and economists have warned of similar economic consequences.
• Trump argues that tariffs once made America prosperous.

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Raising tariffs on foreign goods triggered a global trade war and sank the U.S. economy deeper into despair. This is the story of the Smoot-Hawley Tariff Act of 1930, a law economists believe deepened the Great Depression.

Today, economists and historians look to what happened nearly a century ago as the U.S. revisits high tariffs under the Trump Administration.

“A lot of things made the Great Depression ‘great’ or terrible, and the tariffs were certainly one of those,” said Gary Richardson, a professor of economics at the University of California, Irvine.

What caused the Great Depression?

President Donald Trump tells a different story of history. When announcing his “Liberation Day” tariffs on April 2, he implied introducing the income tax and lowering tariffs led to the Great Depression.

“In 1913, for reasons unknown to mankind, they established the income tax so that citizens rather than foreign countries would start paying the money necessary to run our government,” Trump said. “Then in 1929, it all came to a very abrupt end with the Great Depression, and it would have never happened if they had stayed with the tariff policy, it would have been a much different story. They tried to bring back tariffs to save our country, but it was gone. It was gone. It was too late.”

A lot of things made the Great Depression ‘great’ or terrible, and the tariffs were certainly one of those.

Gary Richardson, professor of economics, UC Irvine

“The Great Depression started in the U.S. because the Federal Reserve tightened interest rates too much, and then we’re on a gold standard that spread that shock around the world,” said Richardson, the former official historian for the Federal Reserve System. “And things got worse in the U.S. and other countries, in part because we had a trade war in the middle of the Great Depression, which wasn’t a very smart thing to do.”

What did the Smoot-Hawley Tariff Act do?

The Smoot-Hawley Tariff Act of 1930 raised tariffs on foreign agricultural products and manufactured goods by about 20%. Republican Sen. Reed Smoot represented Utah, while Republican Rep. Willis C. Hawley represented Oregon.

In the 1920s, their constituents, particularly farmers, struggled to keep up with foreign competition post-World War I.

“Smoot and Hawley had proposed several times before 1930 to have tariffs increased. And in 1930, the Great Depression started to roll. A lot of people were looking for easy solutions,” Richardson explained.

For Smoot and Hawley, it was their moment to get the tariff act through. That moment was met with pushback. Most Democrats opposed the bill but it still had enough support to pass Congress. 

Last-ditch efforts to kill the act failed

Then came the pressure on President Herbert Hoover. Henry Ford spent a night at the White House pleading for Hoover to veto it. He reportedly called the bill “an economic stupidity.”

Meanwhile, more than 1,000 economists nationwide signed a letter warning Hoover of the consequences of passing the bill. 

“We are convinced that increased restrictive duties would be a mistake. They would operate, in general, to increase the prices which domestic consumers would have to pay,” the economists proclaimed. “There are already many evidences that such action would inevitably provoke other countries to pay us back in kind by levying retaliatory duties against our goods.”

Hoover signed the bill anyway. As the economists predicted, other nations retaliated, and international trade plummeted. Economists credited the act with pushing the U.S. deeper into depression.

Within two years of passing the Smoot-Hawley Tariff Act, Hoover lost his reelection campaign. Smoot and Hawley also lost their seats in Congress. 

The US moved further away from tariffs after this law

“Most of the fears of the opponents of the tariffs had been realized,” Richardson said. “I think that was very widely recognized by the late ’30s. By the 1940s, when the U.S. government and the governments around the world were negotiating the post-war economic structure, it was universally agreed then that these tariffs were a terrible idea.”

Fast forward 80 years, and high tariffs are back on the table in the U.S.

“When we were a smart country, in the 1890s and all, this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax,” Trump said on the campaign trail.

“The tariffs were probably a sensible economic policy for the U.S. in the 19th century,” Richardson said. “We really don’t want to go back to the 19th century. We’re living in the 21st Century. The technology is different, and, very importantly, our status in the world is very different.”

Economists warn of similar consequences for today’s tariff actions

So far, the reaction to Trump’s tariff policies is not much different than nearly a century ago. Economists said they would lead to higher prices, nations threaten steep retaliatory levies and the financial community warned the policies could cause a recession. 

“Everyone admits there are problems with the world economy and the world trading system, and we want to fix these problems,” Richardson said. “There’s almost no one who thinks that the tariffs as implemented by the Trump administration are a good idea.”

Hours after Trump’s “Liberation Day” tariffs took effect, the administration announced a 90-day pause on rates higher than 10% for everyone but China, one of America’s top trading partners. After a week of sell-offs, the stock market bounced back for a day before retreating again.