The Great Depression left an indelible mark on the United States for generations. Academics have pondered the causes and resolution in the near 100 years since. While the great stock market crash of 1929 is often seen as a proximate cause, economists very much and rightly point to other factors that prolonged and accentuated the misery in the aftermath of this crash. The stock market crash, itself, did no doubt led to an immediate crisis. But the Smoot-Hawley tariff, the banking crisis, rapid deflation, and the monetary collapse were all part of a multi-factorial house of cards that came tumbling down.
The passage of the Smoot-Hawley tariff and its repercussions is perhaps one of the most discussed and debated events of the Depression era. Some now consider it an easy scapegoat that in no way accounts for the full severity of the events that transpired in the 1930s. However, there is no doubt that the passage of this tariff did not provide the anticipated and desired effects hope for by Senator Reed Smoot and Representative Willis Hawley. That desired effect was to protect American farmers and other producers in the aftermath of World War I and especially in the aftermath of the economic uncertainty produced by the stock market crash of 1929.
In the 1920s, the United States, like the rest of the world, was attempting to return to “normal” in the aftermath of World War I. The Spanish Flu Epidemic added an additional bit of uncertainty to the period, as well. American farmers and manufacturers had responded to the need for additional goods and farm products as life in Europe was disrupted by the war. However, as Europe attempted to regain its footing in the interwar years, American producers would be some of the first to feel a negative effect. These manufacturers and farmers had a sympathetic ear in the Republican Party. When Herbert Hoover was elected, what had first been a limited discussion related to agricultural products expanded to include more than 20,000 separate products with new tariffs. The impact was immediate and severe. Multiple countries, including our dearest allies from the recent war, imposed retaliatory tariffs on goods from the United States. Canada imposed tariffs and at the same time, reduced barriers to trade with the rest of the British Empire.
It became obvious to most almost immediately that the Smoot-Hawley tariffs had been a mistake and a disaster, having the complete opposite effect as had been desired. The tariffs caused the prices of many items to become downright unaffordable to Americans already suffering from a loss of income. However, other factors, such as the ongoing banking crisis and the resulting loss of credit to a wide swath of the population no doubt played a more direct role in Americans’ daily lives. But Smoot-Hawley and its repercussions certainly did not have the desired effect of saving or improving the fortunes of American producers and farmers. The impact was quite the opposite in most circumstances.
While President Hoover was not convinced of the necessity of all the various components of the bill that ultimately crossed his desk for signature, he faced intense pressure from inside his party to sign Smoot-Hawley into law. Multiple members of his cabinet even promised their resignations. This counterbalanced the equally fierce opposition to his signing the bill given by Henry Ford and other titans of American industry. The stock market reacted immediately and declined further, thus signaling the lack of confidence financial markets had in the tariff to remedy any of the ills caused by the financial collapse. President Roosevelt would go on the use the passage of Smoot-Hawley as one more bit of ammunition in his political campaign against Herbert Hoover in the presidential election of 1932.
It was obviously an effective strategy. Roosevelt would go on to sign the Reciprocal Tariff Act of 1934 to begin to unwind the results of Smoot-Hawley. This act not only allowed the unwinding of Smoot-Hawley, it also transferred some of the responsibility for the United States trade policy from the congress to the presidency. In the years after its enactment, the Reciprocal Tariff Act allowed the United States to negotiate 32 trade agreements with 27 different countries, thus serving to aid in unwinding some of the ill effects and ill will caused by Smoot-Hawley. The act also ended, for the duration of the 20th century, at least, the tariff policy of the United States that had been in place since the aftermath of the Civil War which saw the United States Congress enact many such protective tariffs. Truly, as some argue, Smoot-Hawley was just business as usual for the legislative branch. It saw tariff policy as one of its rightful tools in manipulating the American economy. Only the poor timing of Smoot-Hawley and the inability of Hoover and those in his party to understand the severity of the economic situation in the aftermath of the 1929 stock market crash would ultimately end this era of American trade policy.
As Smoot-Hawley’s effects were blunted by the RTA, international trade did begin to return. However, as Smoot-Hawley had not been the only cause of the financial pain of the Great Depression, its ending alone would likewise not see a return to prosperity. But the lessons learned from the debacle would impact U.S. trade policy for many years to come.
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