The Smoot-Hawley tariff has often been listed as a major cause of the Great Depression. The tariff was passed in June 1930. It raised tariffs on a wide array of goods, especially agricultural products. There were vigorous protests against the bill, and 1,000 economists, including all the leaders of the profession, signed a petition urging President Hoover to veto it on the grounds that high tariffs would reduce imports, thus making it more difficult for other countries to earn the money needed to buy U. S. exports. It also was believed that high tariffs would provoke retaliation by other countries. Soon, in fact, other countries did raise their tariffs, for example, Great Britain in 1932. It is difficult to say, however, whether other countries raised their tariffs in retaliation for the American tariffs or simply to raise revenues because other sources of funds were drying up.
Scholars for the most part now agree, however, that the tariff, although unwise, was a minor factor. Trade, for one thing, was less important to the economy than it is now.
Exports were only 6 percent of gross national product in 1930, and imports only 4.9 percent. Many goods, moreover, were exempted from higher tariffs. The increased tariffs did have some positive employment benefits in import-competing sectors. So at most, Smoot-Hawley made a bad situation slightly worse (Eichengreen 1989).
For countries more dependent on trade than the United States, the rounds of tariff increases that followed Smoot-Hawley in the thirties were more significant. Most experts at the time, and since, viewed the tendency to raise tariffs in the thirties as a self-defeating “beggar thy neighbor” policy. Partly as a result, the United States became a champion after World War II (although not always a consistent one) of lower tariffs and freer trade. The Smoot-Hawley tariff turned out to be the last of America’s high “protective” tariffs.
World History
