What to recognize about the Smoot-Hawley tariffs and what their legacy means for Trump

A Republican president-elect pledges back for expansive tariffs as a means of protecting U.S. businesses and hamstringing global competitors.

That description may conjure up former President Donald Trump, but it also applies to Herbert Hoover, who led the country nearly a century ago during the onset of the Great Depression.

Within months of the distribute trade crash, Hoover signed into law the Smoot-Hawley Tariff Act, a 1930 assess that increased tariffs for a broad swathe of imported goods. In response, several countries imposed retaliatory tariffs and trade plummeted. Many economists view the assess as a factor that exacerbated the country’s financial crisis.

“A whole production of Republicans and Democrats after globe War II was very much conditioned against tariff hikes because of the encounter of the 1930s. Now we have a recent production of leaders who are much more willing to pull the trigger on higher tariffs,” Douglas Irwin, a professor of economics at Dartmouth College and author of “Peddling Protectionism: Smoot-Hawley and the Great Depression,” told ABC information.

Here’s what to recognize about the Smoot-Hawley Tariff Act, its economic impact, and what its legacy means for tariffs promised by Trump, according to experts.

What is the Smoot-Hawley Tariff Act?

The Smoot-Hawley Tariff Act arrived at a instant of economic crisis.

As the distribute trade wobbled and financial panic took hold, Congress negotiated a set of tariff increases that initially aimed to protect U.S. farmers from foreign competition but ultimately extended to a wide range of manufactured goods.

The assess is named after its key supporters in Congress: Republican Sen. Reed Smoot of Utah and Republican Rep. Willis Hawley of Oregon. It passed the Senate by a narrow spread of 44 to 42, and sailed through the House of Representatives by a vote of 264 to 147. Hoover signed Smoot-Hawley into law in June 1930.

For products already facing tariffs, the law, on average, raised the import levy from 40% to nearly 60%, making for an boost of roughly 20 percentage points, Kris Mitchener, a professor of economics at Santa Clara University who studies Smoot-Hawley, told ABC information. It also significantly expanded the number of goods subject to a tariff, he added.

“It culminated in a more or less complete rewrite of the tariff schedule,” Mitchener said, referring to the country’s tariff code.

What happened after Smoot-Hawley took result, and did it factor the Great Depression?

The Smoot-Hawley tariffs set off a near-immediate trade war, in which several foreign nations responded to tariffs by slapping U.S. imports with taxes of their own.

For instance, Canada placed tariffs on 16 products that accounted for roughly a third of U.S. exports, according to a working document co-authored by Mitchener in 2021. France and Spain both slapped taxes on imported American automobiles, a major U.S. industry.

“America’s trade partners responded by targeting U.S. exports,” Mitchener said. “The most significant declines were in the products that were targeted.”

As a outcome, market activity partners suffered reduced output, but so did the United States, Michener said.

The trade slowdown weakened the economy and exacerbated the country’s financial crisis, experts said. However, the Great Depression had taken hold before the effects of Smoot-Hawley, ruling it out as a factor of the crisis, they added.

“Smoot-Hawley impacted the U.S. economy at a vulnerable instant,” Irwin said.

What could the legacy of Smoot-Hawley cruel for Trump’s tariff proposals?

Smoot-Hawley cast a shadow over tariff policy for decades, Irwin said. “It gave tariffs a impoverished name,” he added.

For decades, prominent members of both major parties concentrated on the risks posed by tariffs, occasionally citing Smoot-Hawley, Irwin said.

“The Smoot-Hawley tariff ignited an international trade war and helped sink our country into the Great Depression,” then-president Ronald Reagan said during a radio address in 1986.

The assess also played a key role in shifting tariff authority from Congress toward the executive branch, since lawmakers sought a speedy way to roll back the tariffs, experts said.

In 1934, the Reciprocal Tariffs Act gave the president the power to boost or reduce tariff levels by up to 50%. A series of subsequent laws helped shift additional tariff authority to the president.

“Now, Congress doesn’t have much to do with setting tariffs,” Irwin said.

On the campaign trail, Trump said he could enact tariffs without back from Congress. He is largely accurate in his description of the wide latitude enjoyed by the president in setting and implementing some tariffs, experts previously told ABC information.

“Trump is using the delegated powers to pass tariffs,” Irwin said. “That’s completing the circle of Smoot-Hawley in some sense.”