7. The Smoot-Hawley Tariff Act
History often describes Herbert Hoover as a President who subscribed to the laissez-faire idea of economics, unwilling to intervene to stimulate the financial system to restore prosperity. That description is untrue. Hoover tried several initiatives to strengthen the economy during the first three years of the depression, especially during the second half of 1931 and during the election year of 1932. It’s just that most of them didn’t have any measurable impact, other than those which worsened conditions in the United States. One of the latter was the Smoot-Hawley Tariff Act, signed by the President in June, 1930.
Over a thousand economists and financial leaders urged the President not to sign the new tariff. He ignored them, believing the tariffs would ease unemployment in the United States. The price of imported goods and materials jumped. American exports dropped by over 60%. Unemployment went from an estimated 8% when the tariffs were enacted, to double that a year later, to over 24% in 1932. The Smoot-Hawley Act was not in itself a cause of the Great Depression, but it did nothing to ease the financial distress, and likely contributed to its length. Between 1929 and 1934 worldwide trade decreased by over 60%, in part due to tariffs imposed by competing countries. Nearly all of the economists who urged the President not to sign the act predicted its detrimental impact, though Hoover believed he had to sign the bill.