Via the WSJ, we learn that Doug Irwin is writing a book titled The Smoot-Hawley Tariff and the Great Depression. It’s due next year from Princeton University Press.
While most economists do not hold the Smoot-Hawley tariff responsible for the Great Depression itself, it contributed to a sharp decline in world trade. The tariff slashed U.S. dutiable imports by about 15%, for example. Even worse, it spawned protectionism abroad…
The damage wrought by this tariff had only one silver lining. Ever since, the ghosts of Reed Smoot and Willis Hawley (a Republican congressman from Oregon) have stood in the way of anyone arguing for higher trade barriers. They almost singlehandedly made the term “protectionist” an insult rather than a compliment.
In the two years after the imposition of the Smoot-Hawley tariff in June 1930, the volume of U.S. imports fell over 40%. To what extent can this collapse of trade be attributed to the tariff itself versus other factors such as declining income or foreign retaliation? Partial and general equilibrium assessments indicate that the Smoot-Hawley tariff itself reduced imports by 4-8% (ceteris paribus), although the combination of specific duties and deflation further raised the effective tariff and reduced imports an additional 8-10%. A counterfactual simulation suggests that nearly a quarter of the observed 40% decline in imports can be attributed to the rise in the effective tariff (i.e., Smoot-Hawley plus deflation).