Tariffs: The Smoot-Hawley Fairy Tale

[unlawflcombatnt]

I'm reposting my post on the Smoot-Hawley Tariff again, since it is not readily available in my own journal.

We're still losing jobs to outsourcing, as we were when I initially posted this in 2008. And people are still trying to claim that the Smoot-Hawley Tariff contributed to the Great Depression.



Tariffs:The Smoot-Hawley Tariff Fairy Tale

Once again, it's necessary to debunk the Globalist fairy tales about the "damage" caused by the Smoot-Hawley Tariff. Below is a copy of U.S. GDP from 1929 through 1939. These are official government figures from the

US Bureau of Economic Analysis (BLS) (link may have changed)

Printable Version of 1929 to 1938

There is a link to a chart below that has key figures highlighted. On that chart, the Trade Balance has been underlined in Red. Exports have been underlined in Blue. Imports have been underlined in Orange.



** Note on the above referenced charts: The 1929 Trade balance is listed as +$0.4 billion. This is a MISTAKE. It should be +$0.3 billion. Subtracting the $5.6 billion in imports from the $5.9 billion in exports gives a difference of +$0.3 billion, not +$0.4 billion.

Notice that there is a slight decline in both exports and imports by the end of 1930. The trade balance remained around 0 during the entire time. Exports bottomed in 1932 — 2 years before any revision or modification of Smoot-Hawley occurred.


The Smoot-Hawley Tariff was signed into law on June 17, 1930, and raised U.S. tariffs on over 20,000 imported goods. Legislation was passed in 1934 that weakened the effect of the Smoot-Hawley Tariff. In effect, the 1934 legislation functionally repealed Smoot-Hawley. Thus, the effects of Smoot-Hawley cover only the period between June 17, 1930, and 1934. This is the time frame that should be focused on.

So in reviewing the chart, what evidence is there that the Smoot-Hawley Tariff "hurt" the economy?? Is there any evidence at all?

No, there is practically NO evidence that Smoot-Hawley hurt our economy.

The US was already in a Depression when Smoot-Hawley was enacted. Prior to Smoot-Hawley, the 1929 Trade Surplus was +0.38% of our GDP. In other words, it contributed less than 1/200th to our economy.

What happens if we focus on exports alone? Exports were $5.9 billion in 1929, and had declined to $2.0 billion in 1933, for a -$3.9 billion decline. This $3.9 billion decline was roughly 3.8% of our 1929 GDP, which had already declined by a whopping -46% over the same period of time. Thus, of the -46% GDP decline, only -3.8% of it was due to a fall in exports.

But the effects on trade must also include the reduction in Imports, which ADDS to GDP. (A decline in imports increases GDP). If the import decline is added back to the GDP total (to measure the net trade balance), the "loss" becomes only -$0.2 billion from our GDP — or less than ½ of 1% of the total GDP decline.

In other words, the document-able "loss" from the Smoot-Hawley Tariff — the "net export" loss — contributed less than ½ of 1% of our our -46% GDP decline. Overall, the Smoot-Hawley Tariff caused almost 0 damage to our economy during the Depression.

To put this in better perspective, let's compare all the GDP components together:

1929 .......................................................... 1933

GDP $103.6 billion--------------------->$56.4 billion ( decreased -$47.2 billion)
Consum. Expend $77.4 bil-------------> $45.9 billion ( decreased -$31.5 bill)
Private Invest $16.5 bil----------------> $1.7 billion ( decreased -$14.8 billion)
*Trade Balance +$0.3 bil-------------->+$0.1 billion ( decreased -$0.2 billion)
Exports $5.9 billion--------------------> $2.0 billion ( decreased -$3.9 billion)
Imports $5.6 billion--------------------> $1.9 billion ( decreased -$3.7 billion)

Again, to re-emphasize, how much difference to US GDP did the export loss make? The Trade Balance worsened by only -$0.2 billion, or about -0.19% of our 1929 GDP ( or less than 1/5th of 1% of 1929 GDP). Meanwhile, our total GDP decreased a whopping -45.5% (or -$47.2 billion).

How much effect did a 1/5th of 1% loss of GDP have on the Great Depression, especially when spread over a 4-year period?

Again, where's all the "damage" that the Smoot-Hawley Tariff caused?? (Was it was all in "off-balance sheet" accounts?)

From the actual statistics, the true "harm" caused by the Smoot-Hawley is completely fictional. The harmful effects exist only in the minds of self-serving Globalist propagandists, who hope no one will actually check the facts, and expose their disingenuous attempts to re-write history.

Based on available statistics, Smoot-Hawley had almost NO effect on the Great Depression. At the very most, caused a -3.8% decline in GDP from loss of exports. But factoring in the GDP increase from a decline in imports, it caused less than 1% of the GDP decline.

The Smoot-Hawley Tariff did not cause the Great Depression, nor did it worsen it or extend it. Claims to the contrary are not only false, but easily refutable. The evidence to disprove those claims is abundant, overwhelming, and freely available to the public.

The Smoot-Hawley myth needs to be put to rest, once and for all. The claim that it worsened the Great Depression is nothing but a fairy tale.

Economic Populist Forum: Smoot-Hawley Tariff

[freshwest]

1. Thanks, saving that.

[femrap]

2. Whenever 'they'

raise their collective voices to that whiny pitch, I know they are covering up the truth and demanding the sheeple believe their myth and lie.

Thanks for posting!

[hfojvt]

3. actually .4 may not be a mistake, it likely is not

exports were 5.9 which actually means from 5.85 to 5.94. Imports were 5.6 which means from 5.55 to 5.64. Any difference from .35 to .44 is going to round to .4.

For example 5.93 - 5.58 rounds to .4


Those figures seem very strange to me. First, that the portion of GDP going to services did not drop that much. From 30 down to 22. A mere 27% drop. Whereas demand for non-durable goods (meaning what - food, clothing and shoes) dropped from 37.7 down to 20.5 a 46% drop. It would thereby seem that much of the service consumption was by richer people who were less affected by the depression. Many of them could stll afford services. Whereas the economy was impacted more by the poor who could no longer afford food and clothing.

The other thing that strikes me is - where the heck is the New Deal? It looks pretty puny in 1933 and 1934. Federal Government spending was 1.9 in 1931 and only 2.3 in 1933 and 3.3 in 1934. That's barely enough to offset the drop in state and local spending from 8.2 in 1930 down to 7.2 in 1934. It looks pretty puny, an increase in spending that was only 3% of 1929 GDP.

However, there must surely be a multiplier effect. People getting jobs with the WPA or CCC or TVA allowed them to buy food and clothes which then gave those retailers and food suppliers income to buy things themselves which rippled through the economy. So an increase of 3 in Federal Government spending really means more than an increase of 3 in the GDP.

But the same must also be true then, of the loss of export income. The drop in exports from 5.9 in 1929 to 2.0 in 1933 would also have a multiplier effect and thus be bigger than it looks. Yet I would say that the drop in exports probably had more to do with the depression of the world economy than it did with Smoot-Hawley. However, the drop in imports from the US would also have a multiplier effect on the economy of our trading partners.

Also, you may see imports as a drain on our economy, but that is not entirely true. You can certainly see that today. When I buy that made in China piece of crapola Wal-mart gets some profit out of that transaction and the Wal-mart worker gets a low paying job from such sales. Other people in shipping and warehousing also get some of their income from processing imports. Vandelay industries is an import-export business which creates American jobs by selling imported crapola to the American consumer. Take away those sales and people are gonna get laid off. Which will again have a multiplier effect.

So I am not sure that you have proven that Smoot-Hawley had a negligible impact on the economy. The other question though is how much impact S-H had on the export and import numbers.