How Trump's threatened tariffs echo a failed American trade policy of the 1930s
Serah Louis | Financial Post
Published Jan 31, 2025

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President Trump’s support for high tariffs and disdain for free trade harkens back to a much older policy — the Smoot-Hawley Act of 1930...

For those unfamiliar with ye old Act, Smoot-Hawley was named for Senator Reed Smoot of Utah, chairman of the Senate Finance Committee, and Representative Willis Hawley of Oregon, chairman of the House Ways and Means Committee, who pushed for higher tariffs to protect domestic farmers.

More than 1,000 economists protested the bill to then-United States President Herbert Hoover, but he signed it anyway, which amped up tariffs on foreign exports to the U.S. by about 20 per cent.

The result was that it greatly diminished global trade — and, some experts argue, exacerbated the effects of the Great Depression...

In 1930, the Republican party held the White House and Republican protectionists controlled the House Ways and Means Committee, which was advocating for high tariffs.

The bill, originally aimed at protecting American farmers by taxing agricultural imports, soon spiralled out of control, with representatives from various sectors calling for increased protection as well...

How did Canada and other countries respond?

Numerous countries, including Canada, retaliated with tariffs of their own. In 1929, 18 per cent of America’s exports went to Canada, which also accounted for 11 per cent of its imports.

Canadian Prime Minister William Lyon Mackenzie King initially matched the Smoot-Hawley tariffs on just 16 products, amounting to 30 per cent of imports from the United States. But when R.B. Bennett took over the Canadian government in 1930, he raised tariffs on American imports even further, while also cutting them on about 270 products from the United Kingdom and its colonies and dominions...

Canada started selling markedly more of its exports to the United Kingdom and reducing its exports to the United States. Agricultural exports made up about half of Canada’s increased exports to the United Kingdom, according to The Globe archives from 1932.

Between 1929 to 1933, U.S. real GDP plunged nearly 30 per cent, while the unemployment rate spiked at 25 per cent. When the next U.S. election rolled around in 1933, voter sentiment for Republicans had soured...

How are things different today?

Bothwell said Trump’s vision for trade is taking the U.S. back to a previous century. But one key difference is that Trump views tariffs as a “weapon of power” rather than protecting local economies, as was the aim of the Smoot-Hawley Act.

Andreas Schotter, a professor of international business at the Ivey Business School, said Trump is using tariffs as a bargaining chip in non-trade issues, such as immigration, currency dominance and geopolitics, “which could lead to more complex and unpredictable retaliations” from other countries.