The Smoot Hawley Tariffs were a debacle that helped plunge America into the Great Depression. What can we learn from them?Today on the show, we tell the nearly 100-year-old story of Smoot and Hawley, that explains why Congress decided to delegate tariff power to the executive branch in the first place. It's a story that weaves in wool, humble buckwheat, tiny little goldfish, and even Ferris Bueller... Anyone? Anyone?It's also what set the stage for the Trump tariffs. President-elect Donald Trump enacted a heap of import taxes in his first term, in particular on goods from China. President Biden's administration largely kept those tariffs in place, and levied new tariffs as well, on electric vehicles and solar panels.And now, as Trump's second presidency is on the horizon, he has promised even more tariffs on Mexico, Canada, China, and even on all imports across the board.And now, as Trump's second presidency is on the horizon, he has promised even more tariffs on Mexico, Canada, China, and even on all imports across the board.We update this classic episode about the Smoot Hawley Tariffs, and review the impact of more recent efforts from Trump and Biden alike.Help support Planet Money by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney. You get bonus episodes!Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: What were the Smoot-Hawley Tariffs?
And this fact, the fact that the president can now levy tariffs, Doug Irwin says that is part of the legacy of Smoot-Hawley.
Yeah. After Congress went tariff crazy in 1930, they basically said, maybe we should have our tariff privileges revoked.
Congress delegated powers to the president to oversee the whole tariff system. So essentially, Congress said, look, we made a mess of it. This didn't work out so well.
They were like a bunch of children who'd been let loose in a candy store and realized they couldn't be trusted to moderate their own intake.
They overate, they got sick, and they said they need some restraint on themselves from doing that again. So they just, you know, delegate it to another party.
Over time, they delegated that power to the executive branch and to the president. They decided that is the better system.
And arguably, we watched that better system in action in 2018. Because when Congress dealt with tariffs, the game was stacked against narrow tariffs. You want to protect like only wool and sugar? Well, good luck, buddy, because it snowballs quickly. But when President Trump wanted to protect steel and aluminum, no snowballing. He didn't have to trade votes to get it passed.
And so we're not seeing hundreds of tariffs like in the days of Smoot-Hawley. Instead, we're seeing these very targeted, very political tariffs. And it could stay that way. But these tariffs still have economists like screaming into their pillows again. Because even narrow tariffs are going to cause the same web of problems. Downstream effects, ultimately shooting ourselves in the foot.
Back in 2018, when we first reported this episode, we asked Professor Doug Irwin, like, do you think in 20 years somebody is going to write a movie scene about a boring high school teacher teaching the lessons of the Trump tariffs?
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Chapter 2: How did tariffs contribute to the Great Depression?
And it's hilarious. It is seriously worth a watch.
It is funny. They're incredibly unique. And if you like adult swim and economics, you're going to love Planet Money TikToks. We are at Planet Money on most social media.
I'm Sally Helm.
And I'm Kenny Malone. This is NPR. Thanks for listening. And for what it's worth, Doug Irwin, popular at parties again.
Most people avoid economists at parties because we're known to be not exactly the most scintillating of personalities. But all of a sudden, my phone is ringing once again asking about historical analogies and what's going on with tariffs today and what the prospective impact might be. So my holiday is over.
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