Why are people talking about Smoot-Hawley, the Great Depression-era tariff plan?
President Herbert Hoover signed the Smoot-Hawley Act of 1930 into law, despite a coalition of more than 1,000 economists urging him against it. Credit: AP/Paul C. Strong
WASHINGTON — As lawmakers, investors and economists alike weigh the future impact of President Donald Trump’s expansive tariff plan, many are looking back nearly a century to the last time the U.S. enacted a wide-reaching tariff agenda.
The Smoot-Hawley Act of 1930, a Depression-era tariff signed into law by then-President Herbert Hoover, continues to be invoked in conversations surrounding Trump’s tariff plan, as the on-again, off-again nature of his tariff agenda has roiled markets over the past few weeks.
Smoot-Hawley was signed by Hoover despite a coalition of more than 1,000 economists urging him against it. The series of tariffs ultimately sparked retaliatory tariffs from other countries, froze international trade and exacerbated the Great Depression, according to the U.S. Senate Historical Office.
A week after launching a series of reciprocal tariffs on dozens of countries, and a baseline 10% tariff on all imported goods, Trump announced Wednesday that he would pause the reciprocal tariffs, except for those on Chinese goods. He announced plans to raise the tariff against China to 125% amid a tariff tit-for-tat between the countries.
The president has said his plan aims to boost American manufacturing and address trade imbalances with the rest of the world. Economic analysts have noted that the U.S. has not launched such a sweeping series of tariffs since Smoot-Hawley was enacted in June 1930.
"The main thing is that this has dramatically raised the risk of a Smoot-Hawley type outcome," said former Federal Reserve Bank of St. Louis President James Bullard in a Monday appearance on CNBC. "Smoot-Hawley was 1930. Other countries retaliated, global trade collapsed and the Great Depression was on. So I think that’s really what has people worried about this."
The Smoot-Hawley Act, negotiated over a 15-month period in Congress, raised tariffs on 20,000 imported products.
Upon taking office in 1929, Hoover convened a special session of Congress to address economic troubles facing the agricultural sector, according to the U.S. Senate Historical Office. Hoover proposed "limited" tariffs on agricultural imports to help boost prices and consumption of U.S. farm products.
But Rep. Willis Hawley (R-Oregon), chairman of the powerful House Ways and Means Committee and Sen. Reed Smoot (R-Utah), chairman of the Senate Finance Committee, expanded on Hoover’s directive and proposed a plan to simultaneously "raise industrial tariffs to new highs," according to the Senate Historical Office.
The tariff plan was met with resistance from Democrats who supported a low-tariff agenda and progressive Republicans. It narrowly passed the Senate by a 44 to 42 vote, and passed the House with a vote of 264 to 147.
The package of tariffs, which economists have said levied an average 20% import tax on goods, led to other countries responding with their own retaliatory tariffs, a move that led to "one of the most drastic drops in world trade," Stony Brook University economics professor Juan Carlos Conesa said.
"Most research agrees that the drop in world trade increased the severity and duration of the Great Depression," Conesa said in an email to Newsday. "Some even argue that the market crash of 1929 itself might have been affected by the congressional discussion of the Smoot-Hawley tariff law."
Trump’s tariff plan was enacted without Congressional approval, but rather through an executive order. Trump declared a national emergency over foreign trade practices, arguing they are hurting American industries, and invoked a Carter-era law that allows the president to regulate the economy "in response to threats originating outside the United States."
Another key difference is "the world financial and trade system is more integrated than a century ago," said Conesa.
"On the financial side, a substantial fraction of U.S. treasury debt and private equity is held abroad, and we are seeing both stocks and treasuries dropping in value significantly," Conesa said. "On the trade side, the level of integration of global supply chains would be unthinkable a century ago. Hence, a prolonged disruption of global supply chains — think of the COVID experience — could have very costly and long-lasting consequences."
Some congressional Democrats and critics of Trump’s plan have shared on social media a November 1988 video clip of Republican President Ronald Reagan calling Smoot-Hawley "a disaster for the working men and women of this country."
"When Congress passed the Smoot-Hawley tariff in 1930, we were told that it would protect America from foreign competition and save jobs in this country. The actual result was the Great Depression," Reagan states in the clip of a weekly Saturday radio address. "Our peaceful trading partners are not our enemies. They are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends, weakening our economy, our national security and the entire free world. All while cynically waving the American flag."
The Smoot-Hawley Act was also immortalized in the 1986 film "Ferris Bueller’s Day Off," in which a history professor played by former Nixon speechwriter Ben Stein tests the class on the subject.
"Did it work? Anyone? Anyone know the effects?" Stein’s character asks in a clip that has since been widely circulated on social media. "It did not work, and the United States sank deeper into the Great Depression."
WASHINGTON — As lawmakers, investors and economists alike weigh the future impact of President Donald Trump’s expansive tariff plan, many are looking back nearly a century to the last time the U.S. enacted a wide-reaching tariff agenda.
The Smoot-Hawley Act of 1930, a Depression-era tariff signed into law by then-President Herbert Hoover, continues to be invoked in conversations surrounding Trump’s tariff plan, as the on-again, off-again nature of his tariff agenda has roiled markets over the past few weeks.
Smoot-Hawley was signed by Hoover despite a coalition of more than 1,000 economists urging him against it. The series of tariffs ultimately sparked retaliatory tariffs from other countries, froze international trade and exacerbated the Great Depression, according to the U.S. Senate Historical Office.
A week after launching a series of reciprocal tariffs on dozens of countries, and a baseline 10% tariff on all imported goods, Trump announced Wednesday that he would pause the reciprocal tariffs, except for those on Chinese goods. He announced plans to raise the tariff against China to 125% amid a tariff tit-for-tat between the countries.
The president has said his plan aims to boost American manufacturing and address trade imbalances with the rest of the world. Economic analysts have noted that the U.S. has not launched such a sweeping series of tariffs since Smoot-Hawley was enacted in June 1930.
"The main thing is that this has dramatically raised the risk of a Smoot-Hawley type outcome," said former Federal Reserve Bank of St. Louis President James Bullard in a Monday appearance on CNBC. "Smoot-Hawley was 1930. Other countries retaliated, global trade collapsed and the Great Depression was on. So I think that’s really what has people worried about this."
What was the Smoot-Hawley Act?
The Smoot-Hawley Act, negotiated over a 15-month period in Congress, raised tariffs on 20,000 imported products.
Upon taking office in 1929, Hoover convened a special session of Congress to address economic troubles facing the agricultural sector, according to the U.S. Senate Historical Office. Hoover proposed "limited" tariffs on agricultural imports to help boost prices and consumption of U.S. farm products.
But Rep. Willis Hawley (R-Oregon), chairman of the powerful House Ways and Means Committee and Sen. Reed Smoot (R-Utah), chairman of the Senate Finance Committee, expanded on Hoover’s directive and proposed a plan to simultaneously "raise industrial tariffs to new highs," according to the Senate Historical Office.
The tariff plan was met with resistance from Democrats who supported a low-tariff agenda and progressive Republicans. It narrowly passed the Senate by a 44 to 42 vote, and passed the House with a vote of 264 to 147.
The package of tariffs, which economists have said levied an average 20% import tax on goods, led to other countries responding with their own retaliatory tariffs, a move that led to "one of the most drastic drops in world trade," Stony Brook University economics professor Juan Carlos Conesa said.
"Most research agrees that the drop in world trade increased the severity and duration of the Great Depression," Conesa said in an email to Newsday. "Some even argue that the market crash of 1929 itself might have been affected by the congressional discussion of the Smoot-Hawley tariff law."
How does Trump’s plan differ?
Trump’s tariff plan was enacted without Congressional approval, but rather through an executive order. Trump declared a national emergency over foreign trade practices, arguing they are hurting American industries, and invoked a Carter-era law that allows the president to regulate the economy "in response to threats originating outside the United States."
Another key difference is "the world financial and trade system is more integrated than a century ago," said Conesa.
"On the financial side, a substantial fraction of U.S. treasury debt and private equity is held abroad, and we are seeing both stocks and treasuries dropping in value significantly," Conesa said. "On the trade side, the level of integration of global supply chains would be unthinkable a century ago. Hence, a prolonged disruption of global supply chains — think of the COVID experience — could have very costly and long-lasting consequences."
How has Smoot-Hawley entered today's discussion?
Some congressional Democrats and critics of Trump’s plan have shared on social media a November 1988 video clip of Republican President Ronald Reagan calling Smoot-Hawley "a disaster for the working men and women of this country."
"When Congress passed the Smoot-Hawley tariff in 1930, we were told that it would protect America from foreign competition and save jobs in this country. The actual result was the Great Depression," Reagan states in the clip of a weekly Saturday radio address. "Our peaceful trading partners are not our enemies. They are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends, weakening our economy, our national security and the entire free world. All while cynically waving the American flag."
The Smoot-Hawley Act was also immortalized in the 1986 film "Ferris Bueller’s Day Off," in which a history professor played by former Nixon speechwriter Ben Stein tests the class on the subject.
"Did it work? Anyone? Anyone know the effects?" Stein’s character asks in a clip that has since been widely circulated on social media. "It did not work, and the United States sank deeper into the Great Depression."
Laura Figueroa Hernandez is the White House correspondent and previously covered New York City politics and government. She joined Newsday in 2012 after covering state and local politics for The Miami Herald.
