Hoover Signs the Hawley-Smoot Tariff Act

Date June 17, 1930

The Hawley-Smoot Tariff Act raised protectionist tariffs in the United States. It sparked foreign retaliation against American products and helped bring on a temporary collapse of the international trading system, exacerbating the financial troubles caused by the onset of the Great Depression.

Also known as Smoot-Hawley Tariff Act

Locale Washington, D.C.

Key Figures

• Willis C. Hawley (1864-1941), U.S. representative from Oregon, 1907-1932, and chairman of the House Ways and Means Committee, 1927-1930
• Reed Smoot (1862-1941), U.S. senator from Utah, 1903-1932, and chairman of the Senate Finance Committee, 1923-1932
• Herbert Hoover (1874-1964), president of the United States, 1929-1933
• William Lyon Mackenzie King (1874-1950), prime minister of Canada, 1921-1926, 1926-1930, 1935-1948
• Richard Bedford Bennett (1870-1947), Canadian leader of the Conservative Party, 1927-1938, and prime minister, 1930-1935
• Ramsay MacDonald (1866-1937), prime minister of Great Britain, 1924, 1929-1935
• Stanley Baldwin (1867-1947), prime minister of Great Britain, 1923-1924, 1924-1929, 1935-1937

Summary of Event

The Hawley-Smoot Tariff raised average U.S. tariff rates by approximately 18 percent. The largest increases were on agricultural products, on which average tariff rates increased by about 57 percent. President Herbert Hoover’s signing of the tariff bill on June 17, 1930, climaxed a political struggle that had lasted more than a year. Proponents of higher tariff rates had hoped in particular to give relief to farmers, whose incomes generally had lagged during the prosperity of the 1920’s. More generally, they hoped that protection from foreign competition would allow U.S. producers to avoid production cutbacks and layoffs as the Great Depression began to unfold.

Opponents of higher tariffs had three main concerns. First, they feared that higher tariffs would end up protecting inefficient domestic producers and thereby result in higher prices for consumers. Second, they were afraid that an increase in U.S. tariffs would spark foreign retaliation, hurting the U.S. export sector. Finally, opponents were afraid that if the United States reduced its purchases of goods from other countries (particularly in Europe) that were heavily indebted to the United States, then it would become difficult for those countries to continue to make payments on their debt. The result might be the undermining of the international financial system.

While serving as secretary of commerce during the Warren G. Harding and Calvin Coolidge administrations, Hoover had become known as a strong proponent of protective tariffs. The 1928 Republican Party platform called for increased duties on agricultural products, and Hoover made this promise a central part of his presidential campaign. Although Hoover himself did not come out in favor of a general increase in tariff rates, he did state during the campaign that the United States should confine its imports largely to those products that could not be produced domestically. This position makes more understandable Hoover’s eventual willingness to accept a general increase in tariff rates.

Shortly after assuming office, Hoover called a special session of Congress to convene on April 15, 1929, for the express purpose of raising tariff duties on agricultural products. Because it was a measure dealing with revenue, the bill the president required was constitutionally required to originate in the House of Representatives. The House quickly passed a tariff bill raising agricultural duties as the president wished. As a result of political trading during the legislative process, the bill contained substantial increases in duties on nonagricultural products as well. The bill was known formally as the Hawley-Smoot bill after its two congressional sponsors, Willis C. Hawley of Oregon—the chairman of the House Ways and Means Committee—and Reed Smoot of Utah, the chairman of the Senate Finance Committee. Hawley’s name came first in the bill’s formal name because he was the first to introduce it, but given Smoot’s greater political prominence, the measure was more popularly known as the Smoot-Hawley bill.

Despite Smoot’s sponsorship of the bill, the Senate was much slower to act on it than the House had been, and the special session of Congress concluded in November without the passage of a new tariff law. When Congress reconvened in April, 1930, a compromise was worked out. The final version of the bill passed in Congress on June 14. The final version of the bill achieved passage in the House fairly easily, by a vote of 222 to 153. It was largely a party-line vote, with 208 Republicans voting for the bill and only 20 against it; 133 Democrats voted against the bill, and only 14 voted for it. The vote in the Senate was much closer—44 to 42 for passage—as a group of eleven so-called Republican Insurgents led by Senators William E. Borah, George W. Norris, and Robert M. La Follette voted against the bill.

Because the increase in tariff rates embodied in the bill went well beyond Hoover’s initial call for an increase in agricultural duties, there was some hope among the bill’s opponents that the president might veto it. Among those arguing in favor of a veto were prominent members of the banking and financial community, some leading industrialists (including Henry Ford), the editors of many prominent newspapers (including The New York Times), and, perhaps most famously, a group of more than one thousand economists who signed a petition urging a veto. Prominent among those arguing in favor of signing the bill were most farm organizations and the American Federation of Labor.

Hoover’s decision to sign the bill was probably most dependent on three considerations. First, as his statements during the 1928 presidential campaign had made clear, he had a strongly protectionist philosophy. Second, he doubted that a better bill could be procured from Congress, and he believed that the failure to pass any tariff bill would be seen, particularly by farmers, as a failure to carry through on an important campaign promise. Finally, he managed to get included in the bill a provision allowing the U.S. Tariff Commission to modify tariff duties in the future. Hoover expected that this provision would put an effective end to congressional tariff making. Hoover signed the Hawley-Smoot Tariff Act into law on June 17, and the law went into effect with the new fiscal year that began on July 1, 1930.

Hoover, Smoot, Hawley, and their proponents hoped that the tariff act would lead to increased income and employment in the United States. This hope was dependent on other nations failing to respond to the measure in kind, and as a result it was not realized. At the time Hoover took office, the Canadian government, under Liberal prime ministerWilliam Lyon Mackenzie King, was committed to lower tariffs. There is some reason to believe that King might have planned to include tariff reductions in his budget announcement of March, 1929, but this possibility was foreclosed by anticipation of Hoover’s announcement of the special session of Congress to consider tariff increases. As time passed and the likelihood of general tariff increases in the United States increased, King came under increasing pressure from Conservative Party leader Richard Bedford Bennett. Bennett argued in favor of using tariffs to shift Canada’s economic relations away from the United States and toward the British Empire. In a widely publicized speech in November, 1929, King warned that if tariff increases adversely affecting Canada were passed by the U.S. Congress, some reaction would surely follow. King still hoped either that no new tariff bill would make it through Congress or that if one did pass, Hoover would somehow manage to shield Canada from its worst effects.

By the spring of 1930, King felt obliged to include in his budget tariff adjustments that reflected the changing political realities. The duties on 270 goods imported from within the British Empire were reduced, and there were small increases in duties on certain imports from the United States. The budget included countervailing duties on 16 products, under which the Canadian duty would be raised to match any increase in duties on those products levied by other countries.

Perhaps buoyed by the initially favorable domestic response to the new budget, King announced that a general election would be held in July. Most observers believed the key issue in the campaign to be the proper Canadian response to the Hawley-Smoot Tariff Act. Bennett accused the United States of attempting to steal the jobs of Canadian workers through tariff increases and reiterated his view that Canada should adjust its tariff structure so as to encourage trade with other countries in the British Empire at the expense of the United States. On the defensive, King attempted to play up what he claimed was the alarm in the United States over the mild tariff increases enacted by Canada in May.

Although many expected the election to be close, the Conservatives won a large victory, securing their only majority in the Canadian parliament in any election between 1911 and 1958. The key to the size of the Conservatives’ victory was their unexpectedly strong showing in Quebec, where resentment against increased U.S. duties on dairy products was very strong, and in the provinces of Alberta, Manitoba, and Saskatchewan, where increased U.S. duties on wheat led to a strong political reaction. Once in power, Bennett fulfilled his promise to increase duties on U.S. products and reorient Canadian trade toward the British Empire.

The reaction of the British government and public to Hawley-Smoot is somewhat difficult to disentangle from general developments in British politics at the time. From the middle of the nineteenth century, Britain had been strongly committed to free trade. As the Great Depression began, Prime Minister Ramsay MacDonald’s Labor government attempted to maintain this commitment to free trade. Rising unemployment, however, helped reinforce calls for a turn toward protectionism. The passage of Hawley-Smoot further undermined support for free trade, particularly within the Conservative Party.

The Conservative Party had been home to a substantial protectionist wing dating back at least to Joseph Chamberlain’s 1903 campaign to raise British tariffs and to negotiate reciprocal tariff preferences with members of the British Empire. However, the majority view within the party, probably reflecting the majority view of the British public, remained in favor of free trade. The Conservative defeat in the 1929 general election was attributed by some to the party’s failure to adopt an aggressive protectionist policy as an offset to the Labor Party’s natural appeal during a time of rising unemployment. It was only following the passage of the Hawley-Smoot Act and increases in tariffs in several British dominions, notably Canada, that Stanley Baldwin, the leader of the Conservative Party, came out in favor of increased British tariffs. Baldwin said that although he remained opposed to protectionism, he had become convinced that only by raising its own tariffs would Britain obtain the bargaining power necessary to negotiate successfully a multilateral reduction in tariff rates.

In September, 1931, Ramsay MacDonald, having lost much of the support of his own party, formed a coalition government, relying heavily on Conservative support. Running on a platform that included pledges of higher tariffs, the coalition won a large victory in October, 1931. A general increase in tariffs was then passed by the House of Commons in February, 1932. This was followed by further tariff increases following the Ottawa Conference of July, 1932, at which Britain and its dominions and colonies agreed to further tariff increases on non-Empire imports and reductions in tariffs on imports from within the British Empire.

Significance

It is not possible to determine with certainty whether the passage of the Hawley-Smoot Tariff Act led directly to an increase in tariffs in other nations. For example, the situation in Britain might well have led to increased tariffs regardless. On the other hand, given Prime Minister King’s general philosophy, it is almost certain that Canadian tariffs would at worst have remained the same and might have decreased had not the American law been passed. The tariff war with Canada cost U.S. exporters dearly. In 1929, 18 percent of U.S. merchandise exports had gone to Canada, and the United States had enjoyed a $445 million merchandise trade surplus with Canada. By 1933, only 13 percent of U.S. merchandise exports were going to Canada, and the United States ran a surplus of only $26 million with Canada.

Overall, the net negative impact on the U.S. economy from the unraveling of the world trade system in the face of retaliatory tariff increases was considerable. Measured in constant 1982 dollars, the United States had a trade surplus in goods and services of $4.7 billion in 1929. By 1933, it had a trade deficit of $1.4 billion. The League of Nations estimated that the volume of world trade declined in real terms by more than 65 percent between 1929 and 1933. Not until the General Agreement on Tariffs and Trade was successfully negotiated in 1947 was the world trading system restored to a sound footing. Willis C. Hawley, Reed Smoot, and Herbert Hoover were all defeated in the 1932 elections.

Bibliography

Ball, Stuart. Baldwin and the Conservative Party: The Crisis of 1929-1931. New Haven, Conn.: Yale University Press, 1988. Includes a discussion of the debates within the British Conservative Party between protectionists and free traders.

Eichengreen, Barry. “The Political Economy of the Smoot-Hawley Tariff.” In Research in Economic History, edited by Roger Ransom. Vol. 12. Westport, Conn.: JAI Press, 1989. The most complete recent discussion of the passage of the bill and its economic implications. Notable for being skeptical of the extent of foreign retaliation and for arguing that Hawley-Smoot may actually have mitigated the impact of the Depression on the United States.

Hoover, Herbert. The Memoirs of Herbert Hoover: The Cabinet and the Presidency, 1920-1933. New York: Macmillan, 1952. Chapter 41 contains Hoover’s discussion of the background to Hawley-Smoot and his reasons for signing the bill.

Irwin, Douglas A. “From Smoot-Hawley to Reciprocal Trade Agreements: Changing the Course of U.S. Trade Policy in the 1930’s.” In The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, edited by Michael D. Bordo, Claudia Goldin, and Eugene N. White. Chicago: University of Chicago Press, 1998. Originally published as a pamphlet by the National Bureau of Economic Research, this essay traces the evolution of the U.S. government’s attitude toward tariffs and trade during the 1930’s. Bibliographic references and index.

Jones, Joseph M., Jr. Tariff Retaliation: Repercussions of the Hawley-Smoot Bill. Philadelphia: University of Pennsylvania Press, 1934. Classic discussion of foreign retaliation against Hawley-Smoot. The largely nontechnical discussion goes into too much detail for most readers but remains the best available account. Chapter 6 discusses Canada, and chapter 7 discusses Great Britain.

Kindleberger, Charles P. The World in Depression, 1929-1939. Berkeley: University of California Press, 1975. Discussion of the contribution of problems in the world trade and financial systems to the deepening of the Depression.

Overbeek, Johannes, ed. Free Trade Versus Protectionism: A Source Book of Essays and Readings. Northampton, Mass.: Edward Elgar, 1999. Anthology of primary documents in the debate between protectionism and free trade; includes selections from Smoot and Hawley. Bibliographic references and indexes.

Pastor, Robert A. Congress and the Politics of U.S. Foreign Policy, 1929-1976. Berkeley: University of California Press, 1980. Argues that the passage of Hawley-Smoot can be explained by Republican predilections to turn to tariffs during times of economic stress. Provides a good, nontechnical discussion of evolution of tariffs after Hawley-Smoot.

Schattschneider, E. E. Politics, Pressures, and the Tariff. New York: Prentice-Hall, 1935. Classic and very influential argument that the final version of the Hawley-Smoot bill was the result of the influence of special interests and lobbyists. Long and rather heavy going for the general reader, but worthwhile for those interested in a still-relevant inside look at the legislative process.