I was an Economics
major in college, so I know more about tariffs than a lot of people. You can
learn a little more about tariffs by revisiting the Smoot-Hawley tariffs of the
1930’s, but the truth is that they simply do not work as intended.
Here is the short version
of the Smoot-Hawley Tariff Act:
https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act
The Tariff Act of 1930, also known as
the Smoot–Hawley Tariff Act, was a protectionist trade
measure signed into law in the United States by
President Herbert Hoover on
June 17, 1930. Named after its chief congressional sponsors, Senator Reed Smoot and
Representative Willis C. Hawley,
the act raised tariffs on
over 20,000 imported goods in an effort to shield American industries from
foreign competition during the onset of the Great Depression,
which had started in October 1929.
Hoover signed the
bill against the advice of many senior economists, yielding to pressure from
his party and business leaders. Intended to bolster domestic
employment and manufacturing, the tariffs instead deepened the Depression
because the U.S.'s trading partners retaliated with tariffs of their own,
leading to U.S. exports and global trade plummeting. Economists and historians
widely regard the act as a policy misstep, and it remains a cautionary example
of protectionist policy in modern economic debates. It was followed by
more liberal trade agreements, such as the Reciprocal Trade
Agreements Act of 1934.
Naturally, our
trading partners retaliated, and their reaction made the Depression worse than
it would have been otherwise.
Both Smoot and
Hawley lost their re-election, and FDR
got elected in 1932.
The 1932 Democratic campaign platform pledged to
lower tariffs. After winning the election, President Franklin D.
Roosevelt and the now-Democratic Congress passed the Reciprocal Trade Agreements Act of 1934.
This act allowed the president to negotiate tariff reductions on a bilateral
basis and treated such a tariff agreement as regular legislation, requiring
only a majority, rather than as a treaty requiring a two-thirds vote. This was
one of the core components of the global economy that developed after World War
II.
After World War II, that understanding supported a push
toward multilateral trading agreements that would prevent similar situations in
the future. While the Bretton Woods
Agreement of 1944 focused on foreign exchange and did not
directly address tariffs, those involved wanted a similar framework for international
trade. President Harry S. Truman launched
this process in November 1945 with negotiations for the creation of a proposed International Trade Organization (ITO).
As it happened, separate negotiations on the General Agreement on Tariffs and Trade (GATT)
moved more quickly, with an agreement signed in October 1947. In the end, the
United States never signed the ITO agreement. Adding a multilateral
"most-favored-nation" component to that of reciprocity, the GATT
served as a framework for the gradual reduction of tariffs over the subsequent
half century.
Postwar changes to the Smoot–Hawley tariffs reflected a
general tendency of the United States to reduce its tariff levels unilaterally
while its trading partners retained their high levels. The American Tariff
League Study of 1951 compared the free and dutiable tariff rates of 43
countries. It found that only seven nations had a lower tariff level than the
United States (5.1%), and eleven nations had free and dutiable tariff rates
higher than the Smoot–Hawley peak of 19.8%, including the United Kingdom with
25.6%. The 43-country average was 14.4%, which was 0.9% higher than the U.S.
level of 1929, demonstrating that few nations were reciprocating in reducing
their levels, as the United States reduced its own
By now, you are
aware of the fact that history often repeats itself.
In 1993, in discussion leading up to the
passage of the North American Free
Trade Agreement (NAFTA), then-Vice President Al Gore mentioned the Smoot–Hawley Tariff as a
response to NAFTA objections voiced by Ross Perot during a debate they had on The Larry King
Show. He gave Perot a framed photograph of Smoot and
Hawley shaking hands after passage of the act.
In April 2009,
then-Representative Michele Bachmann made
news when, during a speech, she referred incorrectly to the Smoot–Hawley Tariff
as "the Hoot–Smalley Act", misattributed its signing to Franklin D. Roosevelt, and blamed him for
the Great Depression. The act has been
compared to the 2010 Foreign Account Tax Compliance Act (FATCA),
with Andrew Quinlan from the Center for Freedom and Prosperity calling
FATCA "the worst economic idea to come out of Congress since
Smoot–Hawley".
As soon as he was sworn in to his second term of office,
Trump imposed a series of tariffs, which were called “Liberation Day tariffs,
and many of them were later ruled illegal by the Supreme court.
The link below goes into a LOT more detail.
https://en.wikipedia.org/wiki/Tariffs_in_the_second_Trump_administration
In its annual forecast supplement for
the global economy that was published in November 2024 ('Year Ahead' for
2025), The Economist observed that [in the
wake of the Tariff Act] "... global trade fell by two-thirds. It was so
catastrophic for growth in America and around the world that legislators have
not touched the issue since. 'Smoot-Hawley' became synonymous with disastrous
policy making"
The tariffs announced on April 2, 2025,
which could raise tariff levels higher than the rates during the Smoot–Hawley
Tariffs, brought
renewed attention to the Smoot–Hawley Act.
In July 2026, the Trump administration
invoked section 338 of the Tariff Act for the first time in its history (96 years after its passage).
This section allows the president to apply a tariff up to 50% to nations which
"discriminate" against American trade. On July 20, Trump invoked this
section with a 50% tariff against multiple industries from Canada effective
August 19. This was partially precipitated by recent Canadian wildfire smoke that caused
negative air-quality across many cities in the Northern United States
The official position
of the White House puts a more positive spin on the tariffs.
Although the latest
round of tariffs is primarily aimed at Canada, Canada will not be paying them.
We will.
They will be paid
by American consumers – and that truth was summed up by Bill Bramhall this
morning.
Bramhall cartoon
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