Smoot-Hawley Tariff
The Smoot-Hawley Tariff was a high U.S. tariff enacted in 1930. Smoot and Hawley were the Republican tariff experts in Senate and House, and they thought that it would help the economy by protecting American manufacturers from imports and prevent American jobs from being lost. The higher tariff was supported by leading spokesmen for agriculture and industry.
The effort backfired as Canada and other major trading partners retaliated and put higher tariffs on goods made in America. American foreign trade fell by 40%. Because of the interrelated nature of global economics (even at that point in history), the tariff contributed to a decline in worldwide trade of 66% from 1929 to 1934.[1]
It has been roundly criticized by nearly all economists of the time and since as a huge mistake; many consider it partly responsible for the Great Depression. However, foreign trade was a small part of the U.S. economy (4%), so economists such as Milton Friedman argue that the tariff could not have directly contributed much to the depression.
Further reading
- Judith A. McDonald, Anthony Patrick O'Brien and Colleen M. Callahan. "Trade Wars: Canada's Reaction to the Smoot-Hawley Tariff," Journal of Economic History, Vol. 57, No. 4 (Dec., 1997), pp. 802–826 in JSTOR
