Candidates from both parties are trying to win votes this fall by criticizing free trade and trade agreements. As John Steele Gordon points out in a wonderful historical essay, “The Great Mistake,” in the latest Barron’s Weekly:
We’ve been down this unfortunate road before. Recall the Smoot‐Hawley tariff, named after its chief congressional sponsors, Sen. Reed Smoot of Utah and Rep. Willis Hawley of Oregon, both Republicans and both chairmen of the committees in charge of taxes.
Introduced in 1929 as the country was tipping into recession, their bill did not have a happy ending. It imposed steep tariff increases on agricultural as well as manufactured goods, raising overall U.S. tariffs to their highest levels in decades. When President Hoover reluctantly signed the bill in June 1930:
The stock market, once again a leading indicator, immediately turned south. It wouldn’t stop falling for two years — the Dow Jones Industrial Average gave up all its gains since its inception in 1896.
Other countries made good on their threats of retaliatory tariffs, and world trade collapsed. American exports had been $5.24 billion in 1929. Three years later U.S. exports were worth only $1.16 billion, a 78% decline. The Smoot‐Hawley tariff would prove to be one of the major government mistakes that converted an ordinary recession into the calamity of the Great Depression.
The protectionist bill was bad politics as well as bad economics. Hoover, Hawley, and Smoot were all swept out of office in 1932.