Smoot-Hawley Tariff
The Smoot-Hawley Tariff was a law concerning tariff levels signed in 1930, as a response to the Great Depression. Championed by two republicans, it raised American tariff levels to the second highest historical level (and the highest level of the twentieth century) , and although it was in compliance with the protectionist sentiment aiming to foster domestic economic growth. In response to American protectionism, many countries retaliated in turn; Canada introduced significant tariffs on US exports, Britain and France also enacted high tariffs, and Hitler's Germany developed a system of autarky (economic self sufficiency).
Explaining the Passage of Smooth-Hawley
Barry Eichengreen uses an interest groups mode to explain the passage of the Smooth-Hawley Tariff. According to this theory, producers are affected differently by exposure to trade. FEP will fall along cleavages between winners from trade and the losers from trade. The producers who are better organized and can create the largest coalition will ultimately determine the FEP. By this logic, the coalition between heavy industry and large agriculture, and the fact that most representatives in Congress were beholden to these constituents all but guaranteed the ratification of Smoot-Haweley.
In the early 1930s, President Roosevelt declared that restoring world trade was subordinate to reinvigorating the US economy.
Nevertheless, as global economic and political conditions increased the opportunity cost of protection for the United States, protectionism came under increasing pressure, culminating in the passage of the Reciprocal Trade Agreement Act as the first step towards liberalization after Smooth-Hawley,
Support of Free Trade
On another note; although many people siding with tariffs defend that it is beneficial for economic growth, it is very interesting to see the reactions of the era's political and economic leaders:
In May 1930, a petition was signed by 1028 economists in the U.S. asking President Hoover to veto the legislation, organized by Paul Douglas, Irving Fisher, James TFG Wood, Frank Graham, Ernest Patterson, Henry Seager, Frank Taussig, and Clair Wilcox. Automobile executive Henry Ford spent an evening at the White House trying to convince Hoover to veto the bill, calling it "an economic stupidity".J. P. Morgan's chief executive Thomas W. Lamont said he "almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot tariff." Hoover opposed the bill and called it "vicious, extortionate, and obnoxious" because he felt it would undermine the commitment he had pledged to international cooperation. Later events would reveal Hoover was right: the international community levied their own tariffs in retaliation after the bill had become law. However, in spite of his opposition, Hoover yielded to influence from his own party and business leaders and signed the bill.
Works cited
Eichengreen, Barry E. “The Political Economy of the Smoot-Hawley Tariff.” in Frieden, Jeffry A., and David A. Lake. International Political Economy: Perspectives on Global Power and Wealth. 4th ed. Boston: Bedford/St. Martin’s, 2000
"1,028 Economists Ask Hoover To Veto Pending Tariff Bill": Professors in 179 Colleges and Other Leaders Assail Rise in Rates as Harmful to Country and Sure to Bring Reprisals", The New York Times, May 5, 1930, http://www.clubforgrowth.org/media/uploads/smooth%20hawley%20ny%20times%2005%2005%2030.pdf
"Shades of Smoot-Hawley", Time, October 7, 1985
Chernow, Ron (1990), The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, New York: Atlantic Monthly Press, p. 323
Sobel, Robert (1972), The Age of Giant Corporations: A Microeconomic History of American Business, 1914-1970, Westport: Greenwood Press, pp. 87–88
