Smoot-Hawley Tariff Act: A Classic Economics Horror Story The U.S. and China have announced new protectionist tariffs, in what some fear is a trade war. We bring you the story of a bygone era of American protectionism: the Smoot-Hawley tariffs of the 1930s.
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Smoot-Hawley Tariff Act: A Classic Economics Horror Story

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Smoot-Hawley Tariff Act: A Classic Economics Horror Story

Smoot-Hawley Tariff Act: A Classic Economics Horror Story

Smoot-Hawley Tariff Act: A Classic Economics Horror Story

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  • <iframe src="https://www.npr.org/player/embed/599707003/599707004" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The U.S. and China have announced new protectionist tariffs, in what some fear is a trade war. We bring you the story of a bygone era of American protectionism: the Smoot-Hawley tariffs of the 1930s.

DAVID GREENE, HOST:

These tariffs and counter-tariffs from the U.S. and China hearken back to an earlier era of protectionism. Sally Helm from our Planet Money team has the tale of Smoot Hawley.

SALLY HELM, BYLINE: In the Venn diagram of iconic pop culture moments...

(SOUNDBITE OF FILM, "FERRIS BUELLER'S DAY OFF")

BEN STEIN: (As Economics Teacher) Anyone, anyone?

HELM: ...And important economic history lessons, there is an overlap of approximately 40 seconds.

(SOUNDBITE OF FILM, "FERRIS BUELLER'S DAY OFF")

STEIN: (As Economics Teacher) The tariff bill, the Hawley-Smoot Tariff Act, which - anyone - raised or lowered...

HELM: That is boring high school teacher from the movie "Ferris Bueller's Day Off." Dartmouth economist Doug Irwin knows this scene virtually by heart.

DOUG IRWIN: Anyone - raised or lowered - raised tariffs during the - anyone? - Great Depression.

HELM: Irwin wrote a book about these tariffs. He says you can call them the Hawley-Smoot or the Smoot-Hawley tariffs. They're named after a senator and a congressman who helped set them in motion. The year was 1929. President Herbert Hoover was about to be inaugurated, and the U.S. economy was doing really well.

IRWIN: Employers were hiring. The unemployment rate was very low. There's no Great Depression in sight whatsoever.

HELM: But one sector wasn't doing as well - agriculture. So Congress set out to write a tariff bill that would protect farmers. Once Congress started talking about tariffs, though, tons of other industries said, hey, wait - can we get some protection for our products, too?

IRWIN: Clothes pins and oil drums, and apparently there was one firm in Ohio that raised goldfish, and they thought that imported goldfish were eating into their market.

HELM: Are we talking like a little goldfish in a bag in a fair?

IRWIN: I think that's what we're talking about.

HELM: Congress went a little tariff crazy. Lawmakers were all trying to get something good for their district. They'd say, I'll support your tariff on wool if you support my tariff on goldfish. And once the votes had all been traded, Congress ended up raising more than 800 tariffs. Now, there was a group of people saying, stop, stop, do not do this - economists. Economists generally don't like tariffs. And they argued, look, if you put a protectionist tariff on wool, then other products that use wool will get more expensive. So Americans will pay more for coats and pants. Also, the economists said, other countries will retaliate. A group of more than 1,000 of them signed a public statement arguing against the Smoot-Hawley Bill.

IRWIN: But unfortunately, members of Congress and the president just didn't listen to them and thought they were a bunch of academic airheads.

HELM: President Hoover signed the tariff bill into law in 1930 as the Great Depression was picking up steam. And anyone, anyone?

IRWIN: Did it work out well? Anyone, anyone? No, it did not work out well, and the economy sank further into the Great Depression.

HELM: Pretty much everything the economists had said would happen happened. A wave of protectionism spread around the globe. Countries formed trade blocks against the U.S., levied counter-tariffs. Global trade fell by 26 percent in the years after this partly because of the Great Depression but also because of Smoot-Hawley and the protectionism that followed. Senator Smoot and Congressman Hawley were both voted out of office in 1932. It took decades to unravel the tariffs and counter-tariffs that they helped create. Sally Helm, NPR News.

(SOUNDBITE OF YELLO'S "OH YEAH")

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