It was 95 years ago in June, 1930, that President Herbert Hoover signed the Smoot-Hawley Tariff law (which had been passed by a Republican Congress) that imposed draconian increases in tariffs on more than 20,000 imported goods.
Smoot-Hawley has been recognized by economists and historians of all political persuasions as having been one of the key elements in destroying the world’s economy that fueled the Great Depression over the next 10 years, resulting in the massive unemployment world-wide that led to the rise of Adolph Hitler and the horrors of World War II.
This is the commentary about Smoot-Hawley that presently can be found on the official website of the U.S. Senate:
“On June 13, 1930, the Senate passed the Smoot-Hawley Tariff, among the most catastrophic acts in congressional history. As economists had predicted, the high tariff proved to be a disaster. Even before its enactment, U.S. trading partners began retaliating by raising their tariff rates, which froze international trade. The tariff did not sit well with the voters. In 1932 they turned the majority in both houses of Congress over to the Democrats, by large margins, and booted both Reed Smoot and Willis Hawley out of office.”
Last week’s announcement by President Donald Trump of massive tariffs on every country in the world already has resulted in a huge drop in stock markets world-wide, especially in the U.S., and has led to retaliation from the Chinese.
Trump’s absurd tariff levels not only have no basis in reality, but they have made the U.S. an international pariah, turning us into arguably the most-hated nation on earth (except by Vladimir Putin’s Russia, which is the only major economy that escaped the Trump tariffs).
The United States has enjoyed unprecedented economic growth over the past 30 years, with our per capita GDP zooming way past Japan and our European peers. A cover story in the Economist Magazine last year rated the U.S. as the top economy in the world in the aftermath of the COVID pandemic. However, this week’s cover depicts Trump isolating the U.S. from the rest of the planet and refers to Trump’s tariff announcement as “complete drivel,” a sentiment shared by the Wall St. Journal, among others.
The Trump tariffs will lead to higher prices for all Americans in just about everything we buy. The tariffs will lower our standard of living, with most economists predicting that a serious recession is likely in the months ahead. As the Wall St. Journal noted, tariffs are essentially a tax upon consumers, raising the prices for everyday goods.
For the rich however, the tariffs will be a mere annoyance. Whether they pay an extra $50,000 for their new Ferrari means nothing. But for the average American, an extra $5000 for a new car will represent a significant cost that inevitably will lead the typical middle-class consumer to scale back on discretionary items, such as dining out.
The only real question is not whether, but to what extent, Trump’s actions will hurt the economic well-being of every American both today and, as the Smoot-
Hawley Act showed, for years to come.
