====== FOR IMMEDIATE RELEASE ======
America First Party
1630 A 30th Street #111
Boulder, Colorado 80301
Monday, April 6, 2009
Debunking Free-Trade Propaganda: Smoot-Hawley Not to Blame for Great Depression
Boulder, CO - Free Trade advocates often claim that the 1930 Smoot-Hawley Tariff caused the Great Depression. Given the drastic economic consequences for virtually every American which that calamitous event spawned, and the indelible images of hardship and poverty which all associate with the depression, it is no surprise that this is an effective tactic to oppose all tariffs today. But was the Smoot-Hawley tariff to blame, and more importantly, were any U.S. tariffs to blame?
In 1930, GDP was $91.2 billion, already down 12% from pre-depression levels the year before. Smoot-Hawley was enacted in June of 1930. At that time, the trend in GDP was sharply lower, with the lowest level reached in 1933 -- down 46% from 1930 levels. But to understand the impact of tariffs on GDP, we must first determine the percentage of GDP then due to imports. According to the National Bureau of Economic Research, imports totaled $3.1 billion in 1930, amounting to only 3.4% of U.S. GDP. Smoot-Hawley added to already existing tariffs. According to The Economist, the result was an increase in the "average rate on dutiable goods" from 40% to 48%, an increase of only 8%. Therefore, at the time of its enactment, only 8% of the 3.4% portion of GDP related to imports was influenced by Smoot-Hawley -- a paltry .3% of the overall GDP!
Some might say that the tariff's impact was greater, because it spawned trade wars. If this is the case, we should look at the maximum effect that it could have had on exports as well. Exports, at $3.8 billion in 1930, were roughly equal to imports, and amounted to 4.2% of GDP. Exports and imports therefore amounted to 7.6% of the domestic economy. At the most, Smoot-Hawley influenced, on average, 8% of this 7.6%. So in the worst case, it reduced GDP by only .6%. In comparison, the GDP plummeted a massive 46% during the worst years of the depression, more than 75 times the maximum possible impact of Smoot-Hawley! Regarding the effect of all tariffs, these could have caused a 48% reduction in 7.6% of the economy, reducing GDP by a maximum of only 3.6%. In comparison, the depression caused GDP to fall by an amount more than 12 times greater than the maximum possible impact of all then-existing tariffs.
"It is ridiculous to blame the Great Depression on tariffs," stated National Chairman Jonathan Hill. "Today, many are hoodwinked into thinking that protectionism is harmful, while the damage wrought by unrestricted trade abounds and is now at crisis levels."
Jonathan Hill, National Chairman, 1-866-SOS-USA1, ext. 4
Michael Lynch, Press Secretary, 1-866-SOS-USA1, ext. 2