[Initial Insight] Lessons from the Smoot-Hawley Tariff Act

A History of Tariffs Written Anew Every Morning
Trump Must Learn to Fear the Consequences of Barbaric Gamble

The Smoot-Hawley Tariff Act is considered the strongest protectionist trade law in American history. It imposed unprecedented tariff rates averaging 59% and reaching up to 400% on about 20,000 imported goods. The act was named after Reed Smoot, a Republican senator, and Willis Hawley, a House representative, who led the initiative. Despite petitions from 1,028 economists and warnings from bankers about its side effects, the brakes did not work. Backed by the strong industrial production capacity the victorious countries gained after World War I, the U.S. chose protectionism to support the agriculture sector, which was in recession and suffering from falling agricultural prices. With the support of representatives from primary industry-based regions, President Herbert Hoover signed the bill, which took effect in June 1930.

The results were as expected. The United Kingdom established preferential trade systems with Commonwealth countries, and European countries such as Canada, France, Germany, and Italy raised their tariffs one after another. Between 1929 and 1933, two-thirds of U.S. exports disappeared. As global trade contracted and the Great Depression deepened, a regime change brought Democratic President Franklin Roosevelt to power. In 1934, the U.S. enacted the Reciprocal Trade Agreements Act to begin tariff reduction negotiations, and institutions such as the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD), and the General Agreement on Tariffs and Trade (GATT) were born out of the failure of the Smoot-Hawley Tariff Act.

This is the history of the strongest tariffs before the second term of the Trump administration. In 2025, U.S. President Donald Trump is writing a new chapter in tariff history every day. A new page opens every morning. The calculation methods are crude and the degree of impact is hard to predict, leaving the world powerless. Especially, the recent intensifying tariff war with China is a gambling game where both sides have lost reason. The rates started at 34% and, after several rounds of "double or nothing," have risen to 125%. Although the U.S. announced a 90-day suspension of reciprocal tariffs on countries other than China, it is too early to be reassured. No one knows how things will change tomorrow. The World Trade Organization (WTO) dispute settlement body has become ineffective, and now the textbook methods of "prediction, preparation, and response" are no longer sufficient.

We have memories of turning past American protectionism into opportunities. When Japan imposed a voluntary export restraint (VER) limiting exports of automobiles to 1.68 million units, South Korea’s Hyundai Motor Company filled the gap with the Pony Excel, using it as a stepping stone to global market expansion. As a result, Japan also adopted a high-end car export strategy, creating premium brands like Lexus. However, in today’s hyper-connected era of unprecedented global economic interdependence, the current tariff war is likely an attempt to seize everyone’s opportunities and concentrate them in the U.S. The impact of tariff laws has always been immediate, widespread, and deeply scarring. Although President Trump’s tariff bombardment will eventually stop, in the meantime, some who cannot survive will lose their jobs, and others will go bankrupt.

Tariffs began as tolls on trade between Mesopotamian cities and, systemically, trace their origins to the ancient Roman Portorium, a mark of "civilization." Even with an average tariff of 59%, the Republican Party’s 36-year reign came to an end. President Trump must learn to fear the consequences that this barbaric gamble will bring.

This content was produced with the assistance of AI translation services.