today is the 75th anniversary of an economic catastrophe – President Herbert Hoover’s signing of the Smoot-Hawley tariff.
The Hawley-Smoot bill raised American tariffs to record highs, in an attempt to protect existing jobs and in hopes of helping the unemployed find work producing things the United States previously imported from abroad. Many businesses favored the new tariffs, hoping to retain or expand their markets, and farmers were especially big supporters.
Who was opposed? Most of the leading economists. A Page One headline in the New York Times of May 5, 1930, read: "1,028 economists ask Hoover to veto pending tariff bill." Those signing this public appeal against the new tariffs included many top economists -- 25 professors of economics at Harvard, 26 at the University of Chicago, and 28 at Columbia.
If 9 percent unemployment was troublesome in 1930, when the Hawley-Smoot tariff was passed, it was nothing compared to the 16 percent unemployment the next year and the 25 percent unemployment two years after that. The annual U.S. unemployment rate never got back down to 9 percent again during the entire decade of the 1930s.
American industry as a whole operated at a loss for two consecutive years. Farmers, who had strongly supported the Hawley-Smoot tariffs, saw their own exports cut by two-thirds as other countries retaliated against U.S. tariffs by restricting imports of American industrial and agricultural products.