Nearly a century after they were fresh on the American scene, President Herbert Hoover and the infamous Smoot-Hawley Tariff he signed into law in 1930 are back in the headlines. Making a comparison to President Donald Trump’s protectionist tariffs, critics invoke a common wisdom that deserves reevaluation.
The Smoot-Hawley Tariff is blamed for deepening the Great Depression, destroying international trade, and planting the seeds of World War II. Conservative intellectual Patrick Buchanan disagrees:
That the Smoot-Hawley Tariff caused the Depression of the 1930s is a New Deal myth in which America’s schoolchildren have been indoctrinated for decades. The Depression began with the crash of the stock market in 1929, nine months before Smoot-Hawley became law. The real villain: The Federal Reserve, which failed to replenish that third of the money supply that had been wiped out by thousands of bank failures.
President Hoover’s support for Smoot-Hawley was consistent with the Republican position that protective tariffs, combined with limits on spending, tax reduction, and paying down the national debt, benefited the economy and protected the wages of labor. Believing protectionism would revive and strengthen the economy, Hoover saw new tariffs as a means of combating the Depression already underway.
During the 1928 presidential campaign, Hoover ran on the moderate position that the rates established under Fordney-McCumber were high enough in manufacturing, although recommending further protection for American agriculture. Even before the Great Depression, Hoover saw the decline of the agricultural sector as “the most urgent economic problem in our nation.”
In Congress, Representative Willis Hawley and Senator Reed Smoot guided tariff negotiations, overcoming differences between Republicans and Democrats, agricultural and industrial states, and those who opposed or supported the “flexible tariff” ability Hoover wanted to adjust rates without additional acts of Congress. In the end, Smoot-Hawley received support from all sides, although some reluctantly.
During his lifetime, Hoover argued Smoot-Hawley was not the economic disaster critics alleged. Without the Great War, he said, the United States would probably have gone through a “normal cyclical recession,” pointing out that the onset of the Depression did not correspond with the tariffs and the United States was only following the tariff increases of 30 other countries.
Historian Alfred Eckes suggests that “if incipient protectionism was such a great concern to stock investors, it is striking that the Dow Jones industrial average did not decline when the tariff issue was before the House of Representatives in the winter and spring of 1929.” Eckes goes on to note that “the stock market break came only after Hoover’s protectionist allies lost control of the bill, and the press speculated that either no tariff bill or lower tariffs might result.”
Most of all, the changes in Smoot-Hawley were not especially dramatic, actually increasing the share of U.S. imports without tariffs and accounting for only a little over one percent of GDP. For Eckes, the villain was uncertainty. The American economy had absorbed four significant tariffs in recent decades, including at the beginning of the Roaring ’20s. Swings in policy between national politicians, however, were a different matter.
During the 1932 presidential campaign, Democratic nominee New York Governor Franklin D. Roosevelt made Smoot-Hawley an issue, promising a dramatic shift. Supporting his own position, Hoover pointed to nations with lower living and wage standards depreciating their currencies and posing a “danger of flooding our markets with foreign goods.” Former President Calvin Coolidge warned that a “competitive tariff,” one in parity with or lower than those imposed on U.S. goods, “would only result in foreign nations obtaining an advantage over American industry, agriculture, and workers.” Coolidge presciently cited putting American workers “in competition with those of India, China, and Japan.”
Roosevelt won in a landslide and resurrected progressive President Woodrow Wilson’s preference for international free trade. The enduring negative legend of Smoot-Hawley “is a tribute to the public relations skills of partisans and ideologues with agendas,” according to Eckes.
The architects of the new liberal internationalism insist the Great Depression and both World Wars resulted from the dangerous policies of protectionism and foreign policy isolationism, with any effort to limit immigration included and labeled as nativism. Hoover and Smoot-Hawley, however, are eminently worthy of debate. The alternative approach has resulted in the loss of manufacturing, the decimation of the middle class, and overdependence upon sometimes-hostile foreign countries.
Protectionists of the early Twentieth Century predicted all of this if the nation embraced free trade. Maybe that was coincidence or a lucky guess, but their arguments merit a fresh and open look.
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