TARIFFS: The Smoot-Hawley Fairy Tale

[unlawflcombatnt]

Tariffs:The Smoot-Hawley Tariff Fairy Tale

Once again, it's necessary to debunk the Globalist fairy tales about the "damage" caused by the Smoot-Hawley Tariff. Below is a copy of U.S. GDP from 1929 through 1938. These are official government figures from the U.S. Bureau of Economic Analysis.

The Trade Balance is underlined in red. Exports are underlined in blue. Imports are underlined in orange.



*Note on the above: The 1929 Trade balance is listed as +$0.4 billion. This is a mistake. Subtracting the $5.6 billion in imports from the $5.9 billion in exports gives a difference of +$0.3 billion, not +$0.4 billion.

Notice that there is a slight decline in both exports and imports by the end of 1930. The trade balance remained around 0 during the entire time. Exports bottomed in 1932 — 2 years before any revision or modification of Smoot-Hawley occurred.

The Smoot-Hawley Tariff was signed into law on June 17, 1930, and raised U.S. tariffs on over 20,000 imported goods. Legislation was passed in 1934 that weakened the effect of the Smoot-Hawley Tariff. In effect, the legislation functionally repealed Smoot-Hawley. Thus, the effects of Smoot-Hawley cover only the period between June 17, 1930, and 1934. This is the time frame that should be focused on.


So in reviewing the chart, where is the evidence that the Smoot-Hawley Tariff caused major damage to the economy?? Is there any at all?

The US was already in a Depression. Prior to Smoot-Hawley, the 1929 Trade Surplus was +0.38% of our GDP.

Let's focus on exports alone. Exports were $5.9 billion in 1929, and had declined to $2.9 billion in 1933. This $3 billion decline was roughly 3.8% of our 1929 GDP, which had declined by a whopping 46% over the same period of time. Thus, of the -46% GDP decline, only -3.8% of it was due to a fall in exports.

But the gain from import reduction must also be included. (A decline in imports increases GDP). If the import decline is added back to the GDP total (to measure the net trade balance), the "loss" was only $0.2 billion from our GDP — or less than ½ of 1% of the total GDP decline.

In other words, the document-able "loss" from the Smoot-Hawley Tariff — the "net export" loss — was less than ½ of 1% of our our GDP decline


To put this in perspective, let's compare all the GDP components together:

1929 .......................................................... 1933

GDP $103.6 billion--------------------->$56.4 billion ( -$47.2 billion)
Consum. Expend $77.4 bil----------->$45.9 billion ( -$31.5 bill)
Private Invest $16.5 bil---------------> $1.7 billion ( -$14.8 billion)
*Trade Balance +$0.3 bil------------->+$0.1 billion ( -$0.2 billion)
Exports $5.9 billion--------------------> $2.0 billion ( -$3.9 billion)
Imports $5.6 billion--------------------> $1.9 billion ( -$3.7 billion)

Again, at the risk of being repetitious, how much difference to US GDP did the export loss make? The Trade Balance worsened by only -$0.2 billion, or about -0.19% of our 1929 GDP, or less than 1/5th of 1% of 1929 GDP. Meanwhile, our total GDP 'd a whopping -46% (or $47.2 billion).

How much effect did a 1/5th of 1% loss of GDP have on the Great Depression, especially when spread over a 4-year period?

Again, where's all the "damage" that the Smoot-Hawley Tariff caused?? Was it was all in "off-balance sheet" accounts?

Based on available statistics, Smoot-Hawley had almost NO effect on the Great Depression. At the very most, caused a -3.8% decline in GDP from loss of exports. But factoring in the GDP increase from a decline in imports, it caused less than 1% of the GDP decline.

The Smoot-Hawley Tariff did not cause the Great Depression, nor did it worsen it or extend it. Claims to the contrary are not only false, but easily refutable. The evidence to disprove those claims is abundant, overwhelming, and freely available to the public. The available GDP numbers completely exonerate the Smoot-Hawley Tariff from any contribution to the Great Depression.

The Smoot-Hawley myth needs to be put to rest, once and for all. The claim that it worsened the Great Depression is nothing but a fairy tale.

[ASU2003]

Who gets hurt by increased tariffs and a more protectionist economy? That should be the question.

Trust me, I'm not a fan of having to fill out the paperwork and pay the duties to send commercial goods to foreign countries. But all NAFTA has done for me is add one more form to fill out. It hasn't made it as easy as sending something from New York to California.

As for what happened back in 1929, the world market wasn't nearly as developed back then. Each country produced enough to survive on without assistance from any other country. Unless they needed help. So, if the midwest turned into a dustbowl and didn't produce enough corn, we probably imported it. How would this have been different had there been free trade or no trade?

[tisonlyi]

I don't think anyone argues that one country independently putting in place a set of tariffs on imports did anything to cause or prolong the great depression... what they do argue is that putting tariffs in place causes others to reassess their positions and start a cascade of tariffs being put in place around the world...

One country imposing tariffs, not so bad.
All major economies imposing tit-for-tat tariffs one after the other, and compounding that with competitive devaluations of their currencies...

Bad. Very bad.

Consider your 'myth' only a myth if you fit blinkers to reality.