The Tariff That Backfired
How an attempt to protect American farmers during the Great Depression made everything worse.
2 min read · from UNINTENDED by Mayank Mehta
In the months following the stock market crash of October 1929, American farmers were in crisis. Crop prices were collapsing, and foreign competition was undercutting them at every turn. Senators Reed Smoot and Willis Hawley proposed a solution that seemed like common sense: raise tariffs on imported goods to protect domestic agriculture and give American producers breathing room.
The Smoot-Hawley Tariff Act, signed into law in June 1930, did more than protect farmers. By the time it passed, lobbyists from virtually every American industry had pushed to be included. The final bill raised tariffs on over twenty thousand imported goods by an average of twenty percent. It was one of the most sweeping trade restrictions in American history.
The reaction from the rest of the world was immediate and predictable. Trading partners retaliated with tariffs of their own. Canada, Britain, France, Germany, and dozens of other nations raised barriers against American goods. Within four years, global trade had collapsed by roughly sixty-five percent. The international commerce that had connected economies and sustained growth simply dried up.
The farmers the act was designed to protect were among its worst casualties. Countries that had once been reliable buyers of American wheat, cotton, and tobacco turned to other suppliers. Harvests that had previously been exported now rotted in warehouses. Farm incomes, already in decline, fell further.
The Smoot-Hawley tariff didn't cause the Great Depression. The Depression had deeper roots. But it poured gasoline on a fire that was already burning. By severing the trade connections that linked economies together, it deepened the downturn and prolonged the recovery. What was supposed to be a shield for American workers became a wall that locked everyone inside with the damage.
The price was steep. But it was paid. In the tariff's aftermath, the United States reversed course, passing the Reciprocal Trade Agreements Act in 1934 and eventually helping to create the General Agreement on Tariffs and Trade. The entire modern architecture of international commerce was built, in part, as a reaction to the disaster that one protectionist bill had helped create.