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WASHINGTON, DC - FEBRUARY 10: U.S. President Donald Trump takes a question from a reporter after ... More signing a series of executive orders including 25% tariffs on steel and aluminum, a pardon for former Illinois Gov. Rod Blagojevich, an order relating to the Foreign Corrupt Practices Act, and an order for the federal government to stop using paper straws and begin using plastic straws in the Oval Office at the White House on February 10, 2025 in Washington, DC. Trump has signed more than 50 executive orders as of Friday, the most in a president's first 100 days in more than 40 years. (Photo by Andrew Harnik/Getty Images)
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Stocks around the world continue to slide on President Trump’s nuclear tariff option. The recent actions from Washington have served to elevate uncertainty, raise global fear, push stock prices down, and increase animosity against America. Does Trump have a master plan? Is there a historical lesson we can use to help understand what may come?
A Lesson From History?
Today’s tariffs have caused many to reflect to 1930, when President Hoover signed into law the Smoot-Hawley Tariff Act. Although there are some differences between today’s tariff environment and the environment at that time, there are several similarities to consider. Here’s how the tariffs in 1930 unfolded.
Senator Reed Smoot (R) and Representative Willis Hawley (R) were the two sponsors of the Smoot-Hawley Tariff Act. The U.S. House passed its version in May 1929 by a vote of 264 to 147, with 244 republicans and 20 democrats voting in favor of the bill. The following March (1930), the Senate passed its own version of the tariff bill by a vote of 44 to 42, with 39 republicans and 5 democrats. After merging the two bills, it was sent to President Hoover’s desk for signature. Interestingly, Hoover was not in favor of the bill having campaigned, in part, on international cooperation. Additionally, over 1,000 economists urged Hoover to veto the bill, along with Henry Ford, Thomas Lamont of JPMorgan, and other business leaders. Despite opposition, congressional republicans pressured Hoover to sign, and it was reported that Hoovers cabinet threatened to resign if he didn’t. Ultimately, Hoover succumbed to the pressure and signed the Smoot-Hawley Tariff Act on June 17, 1930.
After signing, retaliatory tariffs began. These counter measures were imposed on the U.S. by Canada, Cuba, Mexico, France, Italy, Spain, Argentina, Australia, New Zealand, and Switzerland. Canada also strengthened its trade ties with Great Britain. Actions from our trading partners, coupled with Smoot Hawley, helped create a vicious trade war, which led to a 66% drop in global trade between 1929 and 1934. Most economists and business leaders believe the Smoot-Hawley bill prolonged the Great Depression and made it much worse.
The economic fallout from the 1930 tariffs hurt Republicans for decades as democrats retained complete control of Congress for approximately 52 of the next 64 years. This issue was also a major reason F.D.R. defeated Hoover in the election of 1932.
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