Aftermath

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As talks over the bill continued, the United States economy began to slow down. By the fourth quarter, there were signs hich showed that the economy was beginning to ener a recession. Then, in October of 1929, the Stock Market crashed.

Description

Source: Fratantuono, Michael. 'The Hawley Smoot Tariff Act of 1930' Exhibit 27

The effect of the Hawley-Smoot Tariff has been widely discussed. Protectionists Alfred Eckes and Pat Buchanan, argue that the crash happened in 1929, before the actual signing of the Hawley-Smoot Tariff into law, in 1930. In fact, the National Bureau of Economic Research discovered that the initial economic decline of the Great Depression began in August 1929, well in advance of the Stock Market crash or the signing of Hawley-Smoot into law (24b).

Other economists believe that the Hawley-Smoot Tariff was directly responsible for the crash. Economist Alan Reynolds demonstrated in 'The National Review' in 1979 that actions which favored the defeat of the bill correlate with positive performance in the Stock Market, while actions favoring passage of the tariff bill correlate quite well with declines in the stock market, culminating with the Stock Market Crash of 1929 (25). Steven Forbes pointed out that when it looked like the tariff bill was sidetracked in late 1929, the markets began to revive (26).

While there is still debate over whether Hawley-Smoot caused the Depression, many economists agree that Hawley-Smoot in fact deepened the Depression. One of the major ways it deepened the Depression was due to retalitory measures by the United States' trading partners. By 1931, 61 countries had raised their import restrictions as retalitory actions to the Hawley-Smoot Bill (27). This lead to a drastic decline in international trade. United States imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Between 1929 and 1934, world trade declined by 66%, thanks in part to these new import restrictions (28).

Many economists have written pieces discussing the Hawley-Smoot Tariff.

• Barry Eichengreen, writing in the Research in Economic History in 1989, argued, "the impact of [Hawley-Smoot] on the rest of the world and feedbacks to the United States, the direct effect of the tariff on the U.S. economy is likely to have been expansionary (29)."

• Mario Crucini, in an article in the American Economic Review written in June of 1994, agrees with Eichengreen, saying, "the Hawley-Smoot Tariff Act of 1930 did not have the massive deflationary implications that are widely attributed to it (30)."