Tariffs: The Smoot-Hawley Fairy Tale

Once again, it's necessary to debunk the Globalist fairy tales about the "damage" caused by the Smoot-Hawley Tariff. Below is a copy of U.S. GDP from 1929 through 1939. These are official government figures from the US Bureau of Economic Analysis

(Here is a link to graphic copy of the 1929-39 GDP chart with the key numbers underlined. The Trade Balance has been underlined in Red. Exports have been underlined in Blue. Imports have been underlined in Orange.)

Notice that there is a slight decline in both exports and imports by the end of 1930. The trade balance remained around 0 during the entire time. Exports bottomed in 1932 — 2 years before any revision or modification of Smoot-Hawley occurred.

The Smoot-Hawley Tariff was signed into law on June 17, 1930, and raised U.S. tariffs on over 20,000 imported goods. Legislation was passed in 1934 that weakened the effect of the Smoot-Hawley Tariff. In effect, the 1934 legislation functionally repealed Smoot-Hawley. Thus, the effects of Smoot-Hawley cover only the period between June 17, 1930, and 1934. This is the time frame that should be focused on.

So in reviewing the chart, what evidence is there that the Smoot-Hawley Tariff "hurt" the economy?? Is there any evidence at all?

No, there is practically NO evidence that Smoot-Hawley hurt our economy.

The US was already in a Depression when Smoot-Hawley was enacted. Prior to Smoot-Hawley, the 1929 Trade Surplus was +0.38% of our GDP. In other words, it contributed less than 1/200th to our economy.

What happens if we focus on exports alone? Exports were $5.9 billion in 1929, and had declined to $2.0 billion in 1933, for a -$3.9 billion decline. This $3.9 billion decline was roughly 3.8% of our 1929 GDP, which had already declined by a whopping 46% over the same period of time. Thus, of the -46% GDP decline, only 3.8% of it was due to a fall in exports.

But the effects on trade must also include the reduction in Imports, which ADDS to GDP. (A decline in imports increases GDP). If the import decline is added back to the GDP total (to measure the net trade balance), the "loss" becomes only -$0.2 billion from our GDP — or less than ½ of 1% of the total GDP decline.

In other words, the document-able "loss" from the Smoot-Hawley Tariff — the "net export" loss — contributed less than ½ of 1% of our our -46% GDP decline. Overall, the Smoot Hawley Tariff caused almost 0 damage to our economy during the Depression.

To put this in better perspective, let's compare all the GDP components together:

1929 .......................................................... 1933

GDP $103.6 billion----------------------->$56.4 billion ( decreased -$47.2 billion)

Consum. Expend $77.4 bil------------> $45.9 billion ( decreased -$31.5 bill)

Private Invest $16.5 bil----------------> $1.7 billion ( decreased -$14.8 billion)

Trade Balance +$0.3 bil----------->+$0.1 billion ( decreased -$0.2 billion)

Exports $5.9 billion----------------------> $2.0 billion ( decreased -$3.9 billion)

Imports $5.6 billion----------------------> $1.9 billion ( decreased -$3.7 billion)

Again, to re-emphasize, how much difference to US GDP did the export loss make? The Trade Balance worsened by only -$0.2 billion, or about 0.19% of our 1929 GDP ( less than ½ of 1% of 1929 GDP).

Meanwhile, our total GDP decreased a whopping -46% (or $47.2 billion).

How much effect did a ½ of 1% loss of GDP have on the Great Depression, especially when spread over a 4-year period? Not much.

Based on available statistics, Smoot-Hawley had almost NO effect on the Great Depression. At the very most, caused a -3.8% decline in GDP from loss of exports. But factoring in the GDP increase from a decline in imports, it caused less than 1% of the GDP decline.

The Smoot-Hawley Tariff did not cause the Great Depression, nor did it worsen it or extend it. Claims to the contrary are not only false, but easily refutable. The evidence to disprove those claims is abundant, overwhelming, and freely available to the public.

The Smoot-Hawley myth needs to be put to rest, once and for all. The claim that it worsened the Great Depression is nothing but a fairy tale.


piezoe's picture
piezoe 4 years 49 weeks ago

Sorry to inform you that you've made an incorrect comparison in comparing decrease in exports as a percent of GDP with the percentage change in GDP. I'll let you figure out for yourself what's wrong with it. What you should have done, however, was measure the percentage change in exports from about 1931 to 1934. If you wanted to make a comparison you could have compared that number with the percentage change in exports in say the 4 years proceeding 1930. That would be 1927-1930.

I would not use the 1930 number at all, because the Act was not passed until June 1930 and it would take some months for its affect to start showing up in any significant way.

The that we were in a deflationary depression should have helped exports, making the precipitous decline in exports from 1931 to 1934 all the more startling. Smoot-Hawley was NOT a good idea!

When you put Tariffs on imports, your trading partners put Tariffs on their imports to counter!

Eugene Kwok's picture
Eugene Kwok 2 years 14 weeks ago

Perhaps what is absent is jobs in the picture. Tariffs cause companies to lose their export market. Add this to an already bad situation of crashing stock markets, company failures, bankruptcies, and we have job losses from the smaller export markets, and job losses from the smaller import market. The problems were compounded by forces acting in concert.

In other words, the tariffs made an already bad situation even worse, by not pulling the economy in the positive direction.

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