Posted by: Dirk | May 5, 2011

Did Smoot-Hawley create the collapse in trade in the Great Depression?

There is a new book out by Douglas Irwin called Peddling Protectionism (a pun on Krugman’s Peddling Prosperity of some years ago). It explains the Smoot-Hawley tariff of 1930 and its consequences. I’d like to have a look, since the following graph has put much doubt on the Smoot-Hawley tariff as a cause of the fall in world trade:

It would be interesting to see a discussion of this issue. Hopefully, it’s in the book. A quick look through Google leads me the Marginal Revolution blog, which provides an excerpt:

The popular perception is that the Smoot-Hawley tariff raised import duties to record levels and helped cause the Great Depression.  In fact, the legislated tariff increase was much smaller than commonly imagined, although it still managed to erase 15 percent of America’s imports of dutiable goods upon impact.  For reasons that will be explained, it was the deflation of prices that accompanied the Great Depression that pushed the tariff to near record levels, restricting trade even more…most economic historians do not believe that the Smoot-Hawley tariff played a large role in the macroeconomic contraction experienced during the Great Depression.

Of course, the take-away lesson of this is not that tariffs were (or are) a good thing.

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