What is the Smoot-Hawley Tariff Act? The 1930 tariffs didn't age well

Let's paint the picture. The U.S. puts tariffs on imported goods from around the world

Other countries retaliate by placing their own tariffs on U.S. goods. Stock markets face a deep sell-off as a global trade war builds

It sounds like today, but actually, I'm talking about what happened nearly a century ago

A lot of things made the Great Depression great or terrible, and the tariffs were certainly one of those

That's not the way President Donald Trump tells it. He implies introducing the income tax in 1913 and lowering tariffs led to the Great Depression

Then in 1929, it all came to a very abrupt end with the Great Depression

And it would have never happened if they had stayed with the tariff policy

It would have been a much different story. They tried to bring back tariffs to save our country, but it was gone

It was gone. It was too late. The Great Depression started in the U.S. because the Federal Reserve tightened interest rates too much

And then we're on a gold standard that spread that shock around the world

And things got worse in the U.S. and other countries, in part because we had a trade war in the middle of the Great Depression, which wasn't a very smart thing to do

For this look into history, we turn to Gary Richardson, an economics professor at UC Irvine

My specialty is economic history I work a lot on kind of recession depression financial crises or reasons that the economy sometimes breaks down

I focus a lot on the Federal Reserve, and I used to be the official historian for the Federal Reserve System

Well, him and Ben Stein. In 1930, the Republican-controlled House of Representatives

in an effort to alleviate the effects of the, anyone, anyone? the Great Depression, passed the, anyone, anyone, a tariff bill, the Hawley-Smoot Tariff Act

The Smoot-Hawley Tariff Act of 1930 raised tariffs on foreign agricultural products and

manufactured goods by about 20 percent. Senator Reed Smoot represented Utah, Congressman Willis

Hawley, an Oregon lawmaker. In the 1920s, their constituents, farmers, struggled to keep up with

foreign competition post-World War I. Smoot and Hawley had proposed several times before 1930

to have tariffs increase. And in 1930, as the Great Depression started to roll

a lot of people were looking for easy solutions. For Republicans Smoot and Hawley, it was their

moment. A moment not without pushback. Most Democrats opposed the bill, but it still had

enough support to pass Congress Then came the pressure on President Herbert Hoover Henry Ford spent the night at the White House pleading for Hoover to veto it He reportedly called the bill an economic stupidity

And more than a thousand economists across the country signed a letter warning Hoover of the consequences

We are convinced that increased restrictive duties would be a mistake. They would operate in general to increase the prices which domestic consumers would have to pay

There are already many evidences that such action would inevitably provoke other countries to pay us back in kind by levying retaliatory duties against our goods

Hoover signed the bill anyway, and as predicted, other nations retaliated. International trade plummeted

Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression

Within two years of passing the Smoot-Hawley tariff act, Hoover lost his re-election campaign and Smoot and Hawley lost their seats in Congress

Most of the fears of the opponents of the tariffs have been realized

So I think that was very widely recognized by the late 30s

And, you know, by the 1940s, when the U.S. government and the governments around the world are negotiating the post-war economic structure, right, it was universally agreed then

that these tariffs were a terrible idea Fast forward 80 years and high tariffs are back on the table

But so far, the reaction to Trump's tariff policies is not much different than nearly a century ago

Economists say they will lead to higher prices, nations threaten steep retaliatory levies

and the financial community warns the policies could cause a recession. Everyone admits there are problems with the world economy and the world trading system

and we want to fix these problems. There's almost no one who thinks that the tariffs

as implemented by the Trump administration are a good idea. The same day Trump's so-called Liberation Day tariffs took effect

the administration later announced a 90-day pause on rates higher than 10

for everyone but China, one of America's top trading partners. After a week of sell-offs, the markets breathed a sigh of relief

For Straight Air News, I'm Simone del Rosario. If you like news stories like this

be sure to check us out by downloading the Straight Air News app. Thank you