Originally passed to protect US farmers and manufacturers against international competition, is America seeing echoes of this protectionist approach once again within the Trump administration, and will it be any different almost a century later? 

We may all have heard the term “Roaring Twenties” about a time of economic prosperity in the US. However, there were underlying issues even then, such as:   

• Income Equality 
• Declining Agricultural Prices 
• Unsustainable levels of Debt 

Which all added to the erosion of the economic foundation the US had begun to rely so heavily on. To combat this, senators Reed Smoot and Willis C. Hawley pushed forward a piece of legislation that targeted imported goods, increasing tariffs on them in order to protect the domestic market from foreign competition. The bill was signed by President Hoover in June 1930, and the tariff was raised on almost twenty thousand different goods that were imported into the US. Some of the tariffs were increased to 60%, but the retaliatory measures other countries may take weren't factored into this. Which led directly to an influx of trade wars across the globe and coincided with the great depression. 

The Great Depression was triggered by the 1929 stock market crash, so the Smoot-Hawley legislation was not the sole cause; it worsened the effects and depth of the depression by stifling international trade. 

This act was responsible for more than just the consequences of trade wars; the timing of its implementation proved to be problematic, coming into force just as the economy was plunging into the Great Depression. 

Some Consequences of the Smoot-Hawley legislation included: 

• A collapse in international trade: between the years 1929 and 1934, global trade fell by approximately 66% as countries worldwide implemented retaliatory trade measures 
• Decline in Exports: Export-dependent industries, including ones in the US, collapsed due to high import tariffs. This goes with the saying that your export is someone else's import! This economic recession reduced the demand for American goods abroad. 
• Domestic unemployment: with such a significant impact on export-reliant industries, it led to mass redundancies, and by 1933, unemployment in the US had reached an all-time high of 25% 

Hindsight is an excellent tool for examining history and learning from previous events. Although the Smoot-Hawley legislation was enacted with the best intentions, it unintentionally set off a chain of events that contributed to the economic downturn in the US and influenced economies on a global scale. 

You may ask why this is relevant today. Always having a new leader brings change and sometimes uncertainty within international trade, and the inauguration of President Trump is no different. During his presidential campaign, Donald Trump’s well-known stance was to bring trade back to American businesses and protect them against foreign competition. Within the first few days of his presidency, he has kept true to his word by introducing tariff increases on imported goods. These aggressive tariff measures are set to include a universal 10% tariff on all U.S. imports and a 60% tariff on Chinese goods. 

The tariffs target specific countries such as China, Canada, Mexico, and the EU, all with the sole intention of creating more jobs in America. But given what we now know about the consequences of the Smoot-Hawley Legislation, is it naive to think that this will not negatively affect global trade and US Exports? 

Only time will tell, and while Trump's policies differ in scope of goods from previous protectionist legislation, they still share similar goals. 

The protectionist goal aims to protect the American market against foreign competition; we now know this ideology has far-reaching effects even domestically. Certain goods will be more costly to produce in America, which will drive the end price up and may put them at a level with importation. And unless you’ve agreed on DDP Incoterm® with, for example, your Chinese supplier, the US business will be liable for that duty again, pushing the cost of the product up., which in turn could lead to a lose-lose scenario. with China and the EU already looking into regulatory tariff measures we can already begin to predict a certain level of economic fallout from this globally. 

What Lies Ahead? 

The Smoot-Hawley Tariff Act of 1930 is a cautionary tale in U.S. economic history, illustrating the consequences of protectionist trade policies. As the United States contemplates new tariff measures under President Donald Trump's administration in 2025, it is imperative to reflect on the lessons from Smoot-Hawley and consider the potential ramifications within the framework of the World Trade Organization (WTO). 

The World Trade Organization, established to promote free and fair trade among nations, relies on member countries adhering to agreed-upon rules and commitments. The tariffs prospered by the Trump administration, the universal 10% tariff, could contravene some of those rules and agreements, particularly the Most-Favoured-Nation (MFN) principle, which requires equal tariff treatment for all trading partners. 

A tariff increase such as the universal one proposed, implemented without WTO consultation or justification under allowable exceptions, may undermine the organisation's authority and could lead to formal disputes. 

As the United States implements new tariff measures in 2025, reflecting on the Smoot-Hawley Tariff Act's legacy is essential. The historical evidence suggests that protectionist policies can lead to unintended economic consequences, including trade wars, economic downturns, and strained international relations. Moreover, aligning trade actions with WTO obligations is vital to uphold the integrity of the global trading system. Policymakers must weigh the short-term objectives of tariff implementation against the potential long-term impacts on both the domestic economy and international relations, striving for strategies that promote sustainable economic growth and global cooperation.