Smoot-Hawley redux?

Economists believe tariffs issued in 1930 contributed to the Great Depression, making it more difficult for the U.S. to emerge from the downturn

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I am reminded of the quote, “those who cannot remember the past are condemned to repeat it,” attributed to George Santayana in 1905. Now, in 2025, the implementation of tariffs on our biggest trading partners including China, Mexico, and Canada, threatens an historical result similar to Smoot-Hawley.

The Smoot-Hawley Tariff Act was passed in 1930 by Congress and signed into law by President Herbert Hoover. The act was named after its sponsors, Republican U.S. Sen. Reed Smoot of Utah and Republican U.S. Rep. Willis C. Hawley of Oregon. It was intended to protect U.S. farmers and manufacturers from foreign competition by assessing import tariffs on over 20,000 imported goods, including agricultural products. The act increased import duties by about 20% on average and led to a sharp decline in U.S. imports and retaliatory tariffs by other countries. 

Most economists agree that the Smoot-Hawley Tariff Act contributed to the Great Depression by making it more difficult for the U.S. to recover from the economic crisis of the time and causing an inflationary response in America.

Here we go again.

Trump’s announcement of tariffs on Canada, Mexico, and China on Feb. 1, 2025, and then paused on Feb 3, 2025, are wreaking havoc on the stock market and businesses. The one thing businesses really hate is uncertainty—and this on-again-off-again saber rattling is causing a lot of angst. Uncertainty makes it difficult to plan and develop alternatives to current sourcing and global manufacturing. The anxiety level is high among business financial leaders and trade compliance professionals.

The tariffs are intended to address immigration and fentanyl imports—issues that we can all agree need attention, strengthened policy, and more strategic negotiations. Tariffs are being used to punish our trading partners until they step up enforcement at our borders. In the case of China, the additional 10% tariffs on imports—in addition to the current 25% 301 tariffs that are already in place—are aimed at China’s unfair competition and fentanyl precursor trafficking.  However, causing chaos and unpredictability for businesses is not calming anyone’s nerves or fears.

Justin Trudeau, Canadian prime minister, made a plea for cooperation over the weekend. Claudia Sheinbaum, the president of Mexico, along with Trudeau have agreed to ramp up enforcement efforts in exchange for a temporary reprieve of the tariffs on their respective countries. Trump has agreed to a 30-day pause on implementing the tariffs. This is most likely Trump’s strategy all along—to threaten and bully our trading partners to do more regarding immigration and fentanyl imports. Meanwhile, businesses are scrambling to determine how to react and what to do next.

The longer-term economic outlook is bleak for all of the countries involved in the tariff fight with higher consumer costs, loss of jobs, and increased international tensions.

Seems like Smoot-Hawley all over again.

SC
MR

The longer-term economic outlook is bleak for all of the countries involved in the tariff fight with higher consumer costs, loss of jobs, and increased international tensions, writes Rosemary Coates.
(Photo: Getty Images)
The longer-term economic outlook is bleak for all of the countries involved in the tariff fight with higher consumer costs, loss of jobs, and increased international tensions, writes Rosemary Coates.
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About the Author

Rosemary Coates, Exec. Dir. Reshoring Institute
Rosemary Coates's Bio Photo

Ms. Coates is the Executive Director of the Reshoring Institute and the President of Blue Silk Consulting, a Global Supply Chain consulting firm. She is a best-selling author of five supply chain management books including: 42 Rules for Sourcing and Manufacturing in China and Legal Blacksmith - How to Avoid and Defend Supply Chain Disputes. Ms. Coates lives in Silicon Valley and has worked with over 80 clients worldwide. She is also an Expert Witness for legal cases involving global supply chain matters. She is passionate about Reshoring.

View Rosemary's author profile.

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