Tariffs: The Smoot-Hawley Fairy Tale

[judes]

Lol I love how people like to pick and chose select pieces of information that they view to support their argument while ignoring the big picture and all other contributing factors. In fact it gets right to the topic of this thread and how the Smoot Hawley fairy tale came about in the first place. By your logic Bobby, since Asia in general (and the rest of the world) has much higher tariffs and other barriers to trade than the US, their economies should be in shambles with no growth at all compared to the US with our comparatively low tariffs. Your logic ignores all other factors that effect economics, like corrupt political regimes, large gaps in the distribution of wealth and incomes that leave little to no consumer demand and human rights in general. It is not as if tariffs can act in a vacuum, but given the right socio-political environment they can help foster productive forms of employment and real wealth creation as is evidenced in the history of the US itself.

[judes]

oh and another thing, blueneck and Walt you are correct in regards to manufacturing and productivity. I have worked in manufacturing for the last 20 some years as a manufacturing engineer. I have witnessed a period of "de automation" in the 90s and early 2000's in an effort to be "lean". Hi tech automation is expensive, usually very specific for the product it is used for, and requires higher skilled generally higher paid employees to maintain and write software for and set up etc.

I have seen the manufacture of products that used to be made in our plant in the US be moved to cheap labor countries and have the automation we had in place be replaced with manual labor because the workers were much cheaper than trying to maintain high tech equipment. In every case I have been involved in, the productivity of the cheap labor country that our products have been shipped off too has decreased greatly from what it was in the US plant, when measured as worker hours per piece. The improved productivity as a reason for outsourcing is the biggest lie told, measuring productivity is something I used to have to do in our plant and I am very familiar with it.

That is one thing about higher wages in the US they have generally encouraged and incentivized innovation as a means to reduce costs. Many inventions and hi tech innovations were fostered on the shop floor in US factories as a means to cut costs and improve quality. All that is being done overseas now where they have first access to the new technologies springing up in the manufacturing environment that used to be born here. We are getting in a position now that it will be impossible to regain what we have lost from all our outsourcing. It makes me want to cry.

[blueneck]

Quote: Most unemployed right now are due to the recession, not the outsourcing.



Much of the newly unemployed may be due to the recession. But even here, production jobs are being actively lost due to outsourcing, as plants close in the US and move production overseas.

But worse still was the pre-recession, pre-existing loss of jobs to outsourcing, which is making it much harder, if not impossible, for us to come out of this recession.

Thats right. if jobs are being offshored as fast as they are being created - its the old hole in the bucket or leaky rowboat. You can simply not catch up if the pace of jobs being created is faster offshore than on.

In past years manufacturing has typically led out of recessions as inventories are rebuilt and consumer demand returns. The multiplier effect that manufacturing once had helped make these pull outs quick - as demand for manufactured goods also created supply chain demands of material and component suppliers, tooling and equipment makers, service providers such as laundry, vending, computer, maintenance, accuonting and so forth, plus transportation in to and out of the production process, not to mention the indirect effects of the corner store, corner tavern, gas station etc that all benefit from the increase mfg activity

globalization short circuits this process by diminishing and removing the multiplier effect - shifting supplier, compenents, tooling equipment offshore. that is why you don't see mfg leading the way out to the effect it once did.

[blueneck]

Feb 12, 2011 11:39:35 GMT -6 judes said:

oh and another thing, blueneck and Walt you are correct in regards to manufacturing and productivity. I have worked in manufacturing for the last 20 some years as a manufacturing engineer. I have witnessed a period of "de automation" in the 90s and early 2000's in an effort to be "lean". Hi tech automation is expensive, usually very specific for the product it is used for, and requires higher skilled generally higher paid employees to maintain and write software for and set up etc.

I have seen the manufacture of products that used to be made in our plant in the US be moved to cheap labor countries and have the automation we had in place be replaced with manual labor because the workers were much cheaper than trying to maintain high tech equipment. In every case I have been involved in, the productivity of the cheap labor country that our products have been shipped off too has decreased greatly from what it was in the US plant, when measured as worker hours per piece. The improved productivity as a reason for outsourcing is the biggest lie told, measuring productivity is something I used to have to do in our plant and I am very familiar with it.

That is one thing about higher wages in the US they have generally encouraged and incentivized innovation as a means to reduce costs. Many inventions and hi tech innovations were fostered on the shop floor in US factories as a means to cut costs and improve quality. All that is being done overseas now where they have first access to the new technologies springing up in the manufacturing environment that used to be born here. We are getting in a position now that it will be impossible to regain what we have lost from all our outsourcing. It makes me want to cry.

you are right judes. I too have worn many hats in my adult life career in and around manufacturing. I have been the industrial engineer that puts together the cost justifications for labor vs automation.

I always bristle when so called experts talk about manuacturing and automation spouting off generalizations and assertions of things they clearly know not of what they speak

You are also correct that manufacturing accounts for over 70% of the R&D invetment. "New" technology and innovation accounts for only a small portion of this. most innovation as you say comes from the factory floor, as engineers constantly improve upon designs and processes. It is in the continuous improvement of and reaplication of existing technologies from which most new innovations come

Innovation and echnology gains go hand in hand with manufacturing, neither can exist in any meanigful way without the other. as one offshores productive capacity, the capacity to innovate follows

[fredorbob]

Feb 12, 2011 11:39:35 GMT -6 judes said:

oh and another thing, blueneck and Walt you are correct in regards to manufacturing and productivity. I have worked in manufacturing for the last 20 some years as a manufacturing engineer. I have witnessed a period of "de automation" in the 90s and early 2000's in an effort to be "lean". Hi tech automation is expensive, usually very specific for the product it is used for, and requires higher skilled generally higher paid employees to maintain and write software for and set up etc.

I have seen the manufacture of products that used to be made in our plant in the US be moved to cheap labor countries and have the automation we had in place be replaced with manual labor because the workers were much cheaper than trying to maintain high tech equipment. In every case I have been involved in, the productivity of the cheap labor country that our products have been shipped off too has decreased greatly from what it was in the US plant, when measured as worker hours per piece. The improved productivity as a reason for outsourcing is the biggest lie told, measuring productivity is something I used to have to do in our plant and I am very familiar with it.

That is one thing about higher wages in the US they have generally encouraged and incentivized innovation as a means to reduce costs. Many inventions and hi tech innovations were fostered on the shop floor in US factories as a means to cut costs and improve quality. All that is being done overseas now where they have first access to the new technologies springing up in the manufacturing environment that used to be born here. We are getting in a position now that it will be impossible to regain what we have lost from all our outsourcing. It makes me want to cry.

Progress is going backwards on this planet.

[jacquelope]

Feb 12, 2011 14:01:00 GMT -6 blueneck said:

You are also correct that manufacturing accounts for over 70% of the R&D invetment. "New" technology and innovation accounts for only a small portion of this. most innovation as you say comes from the factory floor, as engineers constantly improve upon designs and processes. It is in the continuous improvement of and reaplication of existing technologies from which most new innovations come

Innovation and echnology gains go hand in hand with manufacturing, neither can exist in any meanigful way without the other. as one offshores productive capacity, the capacity to innovate follows

Wow, I've always felt that this was true in my cursory examination of manufacturing, but it's nice to see an in-depth explanation of why.

My instincts on this hasn't failed me yet...

[jacquelope]

Ian Fletcher has an article about the Smoot-Hawley fairy tale here, too, on the American Thinker:
www.americanthinker.com/2010/04/protectionism_didnt_cause_the.html

[unlawflcombatnt]

Mar 28, 2011 1:19:20 GMT -6 jacquelope said:

Ian Fletcher has an article about the Smoot-Hawley fairy tale here, too, on the American Thinker:
www.americanthinker.com/2010/04/protectionism_didnt_cause_the.html

Excellent find. Let me quote part of Fletcher's post here:

The Smoot-Hawley tariff was simply too small a policy change to have so large an effect as triggering a depression. For a start, it applied to only about one-third of America's trade: about 1.3 percent of our GDP. One point three percent! America's average tariff on goods subject to tariff went from 44.6 to 53.2 percent -- not a very big jump at all. America's tariffs were higher in almost every year from 1821 to 1914. Our tariffs went up in 1861, 1864, 1890, and 1922 without producing global depressions, and the great recessions of 1873 and 1893 spread worldwide without needing the help of any tariff increases.

If Smoot-Hawley had caused a global trade disaster, it would necessarily have been by triggering a sharp decline in American imports of goods subject to the increased tariff. Did this happen? The data say no

Absolutely right on the money.

Prior to my initial post on Smoot-Hawley, I had thought that the main problem was that there was a difference in our trade balance at that time versus now, and that this made a comparison of current trade policy with the era of Smoot-Hawley useless.

It wasn't until I actually looked at the numbers themselves that I realized that Smoot-Hawley couldn't possibly have made any difference on the Great Depression because our trade was such a minuscule part of our GDP, and that our total trade and trade balance changed very little with Smoot-Hawley.

I hadn't initially thought that Smoot-Hawley was a fairy tale--just that due to the time period it had no application to today's trade disaster. That's still true. But the main reason it has no application to current trade policy, is that it had almost no effect on trade in its own day.

[deadeyedick]

Hi all,

I found your excellent discussion thread while looking for some tariff data. Not only did Smoot-Hawley not have negative effects, whatever was left of it by 1934 probably prevented a worse depression.

Just thought I'd throw in some relevant paragraphs about the effects of the free traders' response to Smoot-Hawley (the Reciprocal Trade Agreements Act) from the book "Unforgiven" (p.214-215, 2003 edition) by Charles Walters. "Coulter" is former US Tariff Commission chairman John Lee Coulter.

XXXX

True, imports decreased fully two-thirds between 1929 and 1933, but this falloff was not caused by tariffs, since two-thirds of the imports were on the free list, and remained on the free list.

A little pencil pushing told Coulter something few of his colleagues even guessed. Imports into 109 countries averaged slightly more than $33 billion annually during the five-year period, 1925-1929. Then world imports dropped (in response to world-wide collapse in prices, especially on raw materials such as rubber, sugar, coffee, milk, tin, and many others). By 1930—before passage of the Smoot-Hawley Tariff Act—world imports had fallen below $29 billion, a decrease of nearly $7 billion. By 1931 imports fell another $8 billion, or to a level of $21 billion. A year later, imports fell another $7 billion, or to less than $14 billion.

"Just as the Tariff Act of 1930 had no measurable relationship to the world-wide decline in imports and exports, so, too," said Coulter, "the so-called Reciprocal Trade Agreements Act had no relationship to recovery."

Certain lessons emerged from all this. Coulter found that "whereas prices in general advanced about 20% between 1934 and 1937, prices of commodities on which tariff reductions were made decreased about 9.9%."

Thus it appeared that the concessions made by the U.S. in effect brought on the following general results.
1. They served to force farm prices down and prevented them from recovering.
2. They displaced farm products in the American market by encouraging an increase in imports.
3. They displaced factory products, thus causing unemployment in the industrial sector, and hurting the farm market by lowering the purchasing power of factory wage earners.
4. They thus became a factor in holding down factory payrolls because of the severe competition from foreign products, thus lowering labor's purchasing power and interfering with the development of a profitable market in the United States for the products of the farm.

By 1937, duties on 47% of all dutiable farm raw materials had been lowered in homage to the Reciprocal Trade Agreements. Although the law also permitted increases in tariffs, none were made.

XXXX

Translation: Free trade, by depressing prices, is what prolonged the great depression. It wasn't until 1942, when farm prices were increased to parity levels by the War Stabilization Act, that farm income began to recover, followed by factory income. Unforgiven provides ample data from this period to show the positive relationship between prices, profits and wages.

High prices (at or above the cost of production) are good, assuming you are protected by tariffs from cheap imports, because they put more money in both labor's and industry's pockets to consume more expensive stuff (from diswashers to capital equipment), and prevent the need for government bailouts to keep the economy functioning.

This is essentially what "Austrians" and other free-traders don't understand. "Inflation" is the a necessary response to free trade. It prolongs the effects of the real economic depression created by and for Wall Street. You can either have free trade until your society collapses (due to happen pretty soon), or protectionism, which will kill Wall Street and might force you to have a real job instead of selling insurance.

Keep up the good work!

[nailbender]

Deadeyedick wrote:"Just as the Tariff Act of 1930 had no measurable relationship to the world-wide decline in imports and exports, so, too," said Coulter, "the so-called Reciprocal Trade Agreements Act had no relationship to recovery."

Certain lessons emerged from all this. Coulter found that "whereas prices in general advanced about 20% between 1934 and 1937, prices of commodities on which tariff reductions were made decreased about 9.9%."

Read more: unlawflcombatnt.proboards.com/index.cgi?board=globalization&action=display&thread=2528&page=6#ixzz1I0NQIUfY

Deadeye, I haven't read "Unforgiven", will look into it.

I've rummaged for tariff data in relationship to Smoot-Hawley also. It is amazing how little is available, although what is there makes it very clear Tariffs had NO bad effects on the US economy, if anything it did just what it was supposed to do, it preserved US jobs and industrial capacity while generating income for the US Gov. The history books NEVER look into or note the "benefits" gained by the act.

Worldwide trade declined during the GD in relationship to the $ due to deflation and lack of credit worthy borrowers, we reduced supplying foreign credit. I'm not sure however, what the actual decline in "real" or "tonnage" value in trade or consumption declined during this period. I doubt the quantity of trade declined nearly as much as the actual $ values declined. If you know any tonnage data during this period, I would appreciate the link. It seems most trade data is quantified in USD.

The US was a creditor nation before and after the GD, if the reduction in the issuance of foreign and domestic credit could be quantified, it would relate to the drop in foreign trade and domestic consumption. In my view, tariffs were beneficial to the domestic economy and Fed balance sheet during the GD and would be even more beneficial to our current domestic economy as we running an unsustainable trade deficit and are exporting jobs and industry at a devastating pace.

[deadeyedick]

I haven't seen much raw data of that type. Here's one quote from Carl Wilken, who was a contemporary of Coulter's:

"The "Hawley-Smoot" tariff bill often has been blamed for the depression because it blocked the exports of farm products. The simple facts are that we had none to export except cotton and a little wheat. Cotton, our principal export crop, did not suffer from the "Hawley-Smoot" tariff bill. The record of the U.S. Department of Agriculture reveals that in 1930, the year the bill was passed, our cotton exports were seven million bales and in 1931, the year after the bill was passed, our exports were nine million bales and in 1932, the year of the deepest depression we exported 8.8 million bales. The years 1931 and 1932 were two of the best years of cotton exports in the history of the United States. It was low prices that caused the depression and tariffs had little to do with it."

Unforgiven is fantastic – it's mostly about the effort of a handful of economists to reconstruct raw material production and pricing, and to advocate federal parity pricing for raw materials. Wilken did this himself for decades, so that book provides pretty good data between about 1945 and 2000. You can get some more background at normeconomics.org (I'm just a guy - not affiliated in any way).

The US government could easily construct this kind of data based on corporate tax returns, and by recording the sale volumes and prices of raw materials. Unfortunately, this would undermine Cargill, BP and the rest of the cartels who make all their money gambling on everyone else's uncertainty.

I think one false assumption is that "trade" is always good. The Chinese export a hell of a lot, and their standard of living is still lousy (though improving quickly). The increase in cotton exports during the depression didn't necessarily result in a better life for cotton farmers (just ask a 19th century American slave). Guys like Wilken and Coulter pretty much had the situation nailed by starting with the net income of primary producers, and seeing how that effected production, wages and profits nationally.

[unlawflcombatnt]

"Unforgiven" sounds like another book I'm going to have to read--at least the part about the Smoot Hawley Tariff.




Unforgiven by Charles Walters

[jacquelope]

This looks interesting, too, if for no other reason but to provide some redundancy:
www.freerepublic.com/focus/news/2178473/posts

[blueneck]

Another part of the depression and ag products the free traitors conveniently ignore is the severe and prolonged drought in the plains and midwest known as the "dust bowl" this had a far more profound effect on ag production and exports than anything else

the collapse of commodity prices after 1929 forced farmers to cut costs using unsustainable farming practices. the drought made the situation even worse.

workers were displaced, buying power lost, wages depressed.

smoot hawley had nothing to do with this

[deadeyedick]

Unforgiven is a must-read. There's a lot about general economics, but it's mostly about parity pricing, which was one of the unsung keys to the New Deal. "Parity" just means calculating the average overhead : production of farms, mines, oil rigs, etc. on an annual basis, and setting up a government credit facility to guarantee a minimum price per unit.

So if it cost an average farmer $5/bushel to grow wheat, Uncle Sam bought as much wheat as farms could produce at $5/bushel, either selling it back into the domestic market or using it for foreign trade / aid. This encourages productivity increases, since all a farm needs to do is beat the average. It does away with the payments under the farm bill, and pays farms to produce rather than to hold land. Lastly, it gives a "reality principle" to the dollar. A national credit facility can simply issue as much money as it needs to cover increases in production, and the national money supply reflects wealth production rather than unpayable debt.

This was first enacted under an amendment to the 1942 War Stabilization Act, and remained in place until about 1950 (1946-1950 is a good reference point when farms were at ~%100 parity).

Blueneck is absolutely right that the "dust bowl" was another effect of the pressures created by low prices. Responsible farming is a long-term venture, and the farmer needs the ability to forecast and plan.

When farms are profitable, national income (profits, wages, investment) goes up and national debt goes down. Farmers, miners, steel mills, etc. are the ones buying all the heavy equipment and making land more valuable. Imagine the knock-on effects of having thousands of small family ventures buying their own tractors, opening local silos, mills and slaughterhouses, etc. as opposed to the low-margin, centralized cartel system we have.

When farms aren't profitable, they get bailed out by the taxpayer, and their cheap product gets bid up anyway in the futures market. The end consumer price is the same. It's just a matter of whether we want to pay the producers (a virtuous cycle) or the speculators (a vicious cycle). The farm bill is nothing but corporate welfare to Cargill. They get paid twice on each bushel – once by the taxpayer (to keep the farmer alive) and once by the underregulated futures and currency markets (which make them the world's largest private corporation).

Price supports go hand-in-hand with tariffs. You've got to protect yourself from "enemies" both foreign and domestic – both overseas price dumping / coolie labor, and the internal price suppression of Wall Street.

[jacquelope]

Mar 31, 2011 4:45:27 GMT -6 blueneck said:

Another part of the depression and ag products the free traitors conveniently ignore is the severe and prolonged drought in the plains and midwest known as the "dust bowl" this had a far more profound effect on ag production and exports than anything else

the collapse of commodity prices after 1929 forced farmers to cut costs using unsustainable farming practices. the drought made the situation even worse.

workers were displaced, buying power lost, wages depressed.

smoot hawley had nothing to do with this

Hey do you mind if I quote you on another forum?

[blueneck]

Mar 31, 2011 18:00:22 GMT -6 jacquelope said:

Mar 31, 2011 4:45:27 GMT -6 blueneck said:

Another part of the depression and ag products the free traitors conveniently ignore is the severe and prolonged drought in the plains and midwest known as the "dust bowl" this had a far more profound effect on ag production and exports than anything else

the collapse of commodity prices after 1929 forced farmers to cut costs using unsustainable farming practices. the drought made the situation even worse.

workers were displaced, buying power lost, wages depressed.

smoot hawley had nothing to do with this

Hey do you mind if I quote you on another forum?

Any time my friend

[unlawflcombatnt]

Mar 31, 2011 2:20:04 GMT -6 jacquelope said:

This looks interesting, too, if for no other reason but to provide some redundancy:
www.freerepublic.com/focus/news/2178473/posts

That's an interesting post that I certainly do agree with. In fact, the poster used exactly the same numbers that I did for GDP components from 1929 to 1930. In fact, he carried it out a little farther to 1945.

The 1st number is GDP, the 2nd is Consumer Spending, the 3rd is Private Investment, the 4th is Exports, the 5th is imports, and the 6th is Government Spending.

I II III IV V VI
1929 103.6 77.4 16.5 5.9 5.6 9.4
1930 91.2 70.1 10.8 4.4 4.1 10.0
1931 76.5 60.7 5.9 2.9 2.9 9.9
1932 58.7 48.7 1.3 2.0 1.9 8.7
1933 56.4 45.9 1.7 2.0 1.9 8.7
1934 66.0 51.5 3.7 2.6 2.2 10.5
1935 73.3 55.9 6.7 2.8 3.0 10.9
1936 83.8 62.2 8.6 3.0 3.2 13.1
1937 91.9 66.8 12.2 4.0 4.0 12.8
1938 86.1 64.3 7.1 3.8 2.8 13.8



These are the numbers for the subsequent years.
1939 92.2 67.2 9.3 4.0 3.1 14.8
1940 101.4 71.3 13.6 4.9 3.4 15.0
1941 126.7 81.1 18.1 5.5 4.4 26.5
1942 161.9 89.0 10.4 4.4 4.6 62.7
1943 198.6 99.9 6.1 4.0 6.3 94.8
1944 219.8 108.7 7.8 4.9 6.9 105.3
1945 223.1 120.0 10.8 6.8 7.5 93.0

In case I haven't mentioned it, feel free to share any of this information anywhere you see fit. The above chart is a copy from the Government's US Bureau of Economic Analysis--which is funded by our taxes.
It's not "proprietary" or copyrighted information.

[unlawflcombatnt]

This is a post from economist Ian Fletcher from TradeReform.org on the Smoot-Hawley Tariff. It's originally from Fletcher's Huffington Post article from April 2010.

Not surprisingly, he reaches exactly the same conclusion I did about the Smoot-Hawley Tariff:
It almost 0 effect on the Great Depression.

Fletcher uses somewhat different numbers, but the conclusion is exactly the same.


Protectionism Didn’t Cause the Great Depression[/size][/url]

by Ian Fletcher

Oct 26, 2011

"The debate over free trade is riddled with myth after myth. One that keeps resurfacing again and again, no matter how many times it is discredited, is the idea that protectionism caused the Great Depression. One occasionally even hears that the same protectionism — specifically the Smoot-Hawley tariff of 1930 — was responsible in significant part for World War Two! This is nonsense dreamed up for propaganda purposes by free traders, and can easily be debunked.

Let’s start by reminding ourselves of a basic fact: the Depression’s cause was monetary. The Federal Reserve had allowed the money supply to balloon excessively during the late 1920s, piling up in the stock market as a bubble. The Fed then panicked, miscalculated, and let the money supply collapse by a third by 1933, depriving the economy of the liquidity it needed to breathe. Trade had nothing to do with it.

The Smoot-Hawley tariff was simply too small a policy change to have so large an effect as triggering a Depression. For a start, it only applied to about 1/3 of America’s trade: about 1.3% of our GDP. One point three percent! America’s average tariff on goods subject to tariff went from 44.6 to 53.2%–not a very big jump at all. America’s tariffs were higher in almost every year from 1821 to 1914. Our tariffs went up in 1861, 1864, 1890, and 1922 without producing global depressions, and the great recessions of 1873 and 1893 spread worldwide without needing the help of any tariff increases.

If Smoot-Hawley had caused a global trade disaster, it would necessarily have been by triggering a sharp decline in American imports of goods subject to the increased tariff. Did this happen? The data say no. In the words of economic historian, former member of the U.S. International Trade Commission, and avowed free trader Prof. Alfred E. Eckes,

[/font].'[/ul]

World trade did indeed decline, but this was due to the Depression itself, not higher American tariffs. This is no surprise, as declines in the values of the currencies of America’s major trading partners wiped away much of the effect of the tariff anyway.

In light of the facts noted above, it is, in fact, true that just about every serious economist or economic historian....has come to the same conclusion.[i.e., that Smoot-Hawley did NOT cause the Great Depression].

This is not a liberal vs. conservative issue, either: famous economists who have denied that Smoot-Hawley caused the Depression range from Milton Friedman on the right to Paul Krugman on the left.

The same fact can be ascertained by looking at Smoot-Hawley’s impact on the world economy at large. As the economic historian (and free trader) William Bernstein puts it in his book A Splendid Exchange: How Trade Shaped the World,

[/u]. .. At the time of Smoot-Hawley’s passage, trade volume accounted for only about 9% of world economic output. Had all international trade been eliminated, and had no domestic use for the previously exported goods been found, world GDP would have fallen by the same amount — 9%. Between 1930 and 1933, worldwide trade volume fell off by 1/3 to 1/2. Depending on how the falloff is measured, this computes to 3 to 5% of world GDP, and these losses were partially made up by more expensive domestic goods. Thus, the damage done could not possibly have exceeded 1 or 2% of world GDP — nowhere near the 17% falloff seen during the Great Depression… The inescapable conclusion: contrary to public perception, Smoot-Hawley did not cause, or even significantly deepen, the Great Depression[/font]'.[/ul]

The oft-bandied idea that Smoot-Hawley started a global trade war of endless cycles of tit-for-tat retaliation is also mythical. According to the official State Department report on this very question in 1931:

[/font]'[/ul]

That is to say, foreign nations did indeed raise their tariffs after the passage of Smoot, but this was a broad-brush response to the Depression itself, aimed at all other foreign nations without distinction, not a retaliation against the U.S. for its own tariff. The doom-loop of spiraling tit-for-tat retaliation between trading partners that paralyses free traders with fear today simply did not happen.

The myth of Smoot-Hawley continues to poison U.S. policymaking even today, as it renders the U.S. government fearful of retaliating against problems like Chinese currency manipulation. But hopefully, the present controversy over free trade will eventually provoke enough public debate that this hoary myth can finally be put to bed forever.[/i]"

For a more detailed discussion of these issues, please see Chapter 6 of my book:

Free Trade Doesn’t Work: What Should Replace It and Why.

[jacquelope]

I didn't see this mentioned in here, but the other issue with the Smoot-Hawley fairy tale is how it DOES NOT EVEN APPLY to modern times.

The chart suggests that we were running small trade SURPLUSES during the run-up to S/H and afterwards. This is big, because if Smoot/Hawley really ever did any damage in any imaginary Free Traitor universe, it could only do damage if we were running trade surpluses. Such a broad, high, across-the-board tariff would be BENEFICIAL in an age of ultra high trade deficits. It would nullify the deficit. Whoops...