Forgotten Facts About Smoot-Hawley for the Stimulus Package Buy American Crowd

The Republican Party of the 1920's swept into power during a financial crisis. Errors in the Fed’s monetary policy in 1919 in kept rates too low to benefit the sale of Victory bonds. The Fed then tightened excessively due to inflation, creating a financial shock and depression from 1920 to 1921.

At that time, the Republican Party viewed increasing tariffs as good policy. Thus, during the sixty seventh Congress, the Emergency Tariff Act of 1921 was passed as a temporary measure until a more comprehensive measure could be drafted. Ultimately, Fordney-McCumber passed in 1922, imposing an ad valorem rate of 34%, higher than the previous high water mark of the Payne-Aldrich Tariff of 1909. Notwithstanding, the United States trade balance continued to decline until 1924, the same year marginal tax rates were decreased.

The recovery from the 1920-1921 depression had proceeded smoothly with moderate price increases. Ad valorem tariff rates stayed basically stable during the 1920’s . Much can be said about what in this day we would call the “conservative” leadership of Coolidge during this time. Coolidge succeeded to the Presidency upon the August 2, 1923 death of Warren Harding. He kept the Harding administration intact, including his Commerce Department Secretary, Herbert Hoover.

Coolidge's taxation policy was that taxes should be lower and that fewer people should have to pay them. Just before the 1924 Republican Convention began, Coolidge signed into law the Revenue Act of 1924, which decreased personal income tax rates. In addition to tax cuts, Coolidge proposed reductions in federal expenditures and retiring some of the federal debt. He declined to sign several Congressional spending bills. He vetoed the proposed McNary-Haugen Farm Relief Bill of 1926, designed to allow the federal government to purchase agricultural surpluses and sell them abroad at lowered prices, declaring that agriculture must stand "on an independent business basis," and said that "government control cannot be divorced from political control." When Congress re-passed the McNary-Haugen bill in 1927, Coolidge vetoed it again.

Coolidge declined to run for reelection in 1928, leaving the door open for Commerce Secretary Hoover. Hoover was already a national figure and former Presidential candidate, with Woodrow Wilson having privately preferred to him as his successor and a possible Democratic Party presidential candidate in 1920. Although he was registered as a Republican, he had already bolted the party once in 1912 to support Theodore Roosevelt's "Bull Moose" Progressive Party. Hoover chose not to run, believing that 1920 would be a Republican year. During the Harding administration, Hoover promoted the Commerce Department as the hub of the nation's growth and stability through European “associationalism.” Coolidge called him, “Wonder boy” and also quipped that, "for six years that man has given me unsolicited advice—all of it bad."

Reed Smoot was a banker and wool manufacturer. He became Senator from Utah in 1903 while the nation was operating under the Dingley Tariff of 1897, at the time the highest in the nation's history. Smoot obtained an appointment to the Senate Finance Committee in 1908. When Democrats took the presidency and both houses of Congress in 1912, tariffs were sharply reduced. Following the return of the republicans in 1920, the 1923 the Fordney-McCumber Tariff raised tariff rates again, including those on Cuban sugar, a direct competitor with Utah's beet sugar industry, and wool, another Utah industry.

Willis Hawley came to Congress from Oregon in 1907. Willis Hawley ascended to Chairman of the Committee on Ways and Means during the uneventful Seventieth Congress, which met during the last two years of the second Coolidge term.

1927 The Fiat Company, Italy's leading automobile manufacturer, begins pushing Italian government to increase duties on American automobiles and automobile parts, out of frustration for losing to American competition.

1928 Republicans and Democrats both campaign on protectionist platforms. Herbert Hoover is the Republican candidate for President; the Democratic Party nominates Al Smith.

Nov. 6, 1928 Hoover is elected president, carrying 40 of 48 states. Republicans do well in the congressional elections: +30 in House for 267-167 majority, +7 in Senate for 56-39 majority.

Dec. 5, 1928 House Ways & Means Committee authorizes notice of public hearings on tariff. Fourteen subcommittees will take testimony, and hearings will cover all commodities.

1929 Italian media launches campaign against purchasers of American automobiles and automobile parts. Representatives from various Swiss industries begin circulating flyers encouraging the support of European automobiles and other products, while avoiding the support of American industries.

Jan. 7, 1929 House Ways & Means Committee begins hearings. Rep. Willis Hawley (R-OR) is chair.

Feb. 27, 1929 House Committee hearings conclude, after nearly 20,000 pages of testimony and 1100 witnesses.

Mar. 4, 1929 Hoover is inaugurated. Inaugural address calls for limited tariff revisions.

March 8, 1929 Canada proclaims its Canada First policy, that in the interests of Canadian industries, Canada will not seek to continue trading with the United States if the United States continues to show resentment and antagonism with regards to trade with Canada.

Apr. 15, 1929 Extra congressional session convenes (71st Cong., 1st session), called by Hoover to help farmers and make limited tariff changes.

May 7, 1929 Bill is reported to House by the Ways & Means Committee, having been written entirely by Republican members of the committee. Some Republicans are unhappy: agricultural states want higher rates on butter/casein/flaxseed, lower rates on brick/cement/lumber/shingles; California wants duties on figs/dates/hides/long staple cotton; the Northeast wants duties on boots/shoes/leather; etc. At this time, no official protests have been received from foreign nations.

May 23, 1929 Republican committee members come up with ninety-one compromise amendments designed to guarantee Republican unity.

May 28, 1929 Tariff bill is passed by House 264-147. Only 12 Rs vote against; 20 Ds vote for.

May 29, 1929 Bill is referred by Senate to Finance Committee. Sen. Smoot (R-UT) is chair.

June 17, 1929 Sen. Borah (R-ID) moves for “sense of the Senate” resolution to have tariff revision limited to agriculture; fails 39-38. Hoover notes that he convened Congress in order to pass limited changes, but “in considering the tariff for other industries than agriculture, we find that there have been economic shifts necessitating a readjustment of some of the tariff schedules.”

June 19, 1929 Congress takes recess for summer. Senate Finance Committee continues working on tariff bill.

July 18, 1929 Senate Finance Committee hearings conclude. To date, a total of 38 nations have sent formal protests against the Tariff to the Department of State

July 22, 1929 Senate Finance Committee begins meeting in executive session to redraft bill.

Oct. 2, 1929 Senate passes amendment removing President’s ability to set flexible tariff schedules; instead, Tariff Commission’s recommendations will be acted on by Congress. Thirteen insurgent Rs join 34 Ds in passing amendment, 47-42.

Oct. 19, 1929 Senate passes amendment adding farm debenture rider to tariff bill. Debentures will provide export subsidies for farmers. Fourteen insurgent Rs join 28 Ds in passing amendment, 42-34.

Oct. 22, 1929 Senate finishes debating administrative provisions, moves on to rates. Coalition of Ds + insurgent Rs is in control, forces (mostly) lower rates. Passage appears to be a virtual certainty

Oct. 29, 1929 Stock market crashes on Black Tuesday. The Dow-Jones Industrial Average drops 12% as 16.4 million shares are traded.

Nov. 22, 1929 Despite Hoover’s urgings, Senate adjourns without passing tariff bill. >p> Dec. 2, 1929 Regular congressional session convenes (71st Cong., 2d session). Dec. 11, 1929 Former tariff lobbyist Joseph Grundy is appointed as Pennsylvania's junior Senator.

Jan. 17, 1930 After six days of debate, Senate votes to reject House’s proposed tariff raises on sugar. Vote is 48-38; eighteen insurgent Rs join 29 Ds.

Mar. 5, 1930 Amid charges of vote trading, Senate reverses position on sugar; 38 Rs and 9 Ds vote to raise sugar tariffs.

Early Mar. 1930 Coalition of sugar, oil, lumber, and cement interests gain control in Senate; they start raising rates on numerous commodities, including items already voted on previously.

May 5, 1930 1028 American economists send letter to President Hoover asking him to veto tariff bill.

May 13, 1930 Conferees deadlock: Senate has instructed its conferees to keep debenture plan and strike down flexible provision, but House has voted to strike out debenture plan and keep flexible provision. To date, 33 nations have sent formal protests to Congress in opposition of the Tariff.

May 19, 1930 Senate agrees to recede: debenture plan is struck down by 43-41 vote, and VP Curtis casts deciding vote after 42-42 vote on flexible provision.

June 9, 1930 After some back-and-forth between conference and Senate, completed conference report is filed. To date, 59 nations have sent formal protests to Congress in opposition of the Tariff.

June 13, 1930 Senators Reed and Grundy criticize conference report but decide to accept. Senate adopts conference report, 44-42.

June 14, 1930 House adopts conference agreement, 222-153. Vote is largely along party lines: only 14 Ds vote for, only 20 Rs vote against.

June 18, 1930 Tariff goes into effect at 12:01 a.m. Word begins to travel through Switzerland to boycott American products.

Nov. 1930 France signs concession treaty with Spain, thereby negating the effects of the Wais Tariff on France.

Sept. 17, 1930 Canada enacts Canadian Emergency Tariff, increasing tariffs virtually across the board by 50%.

Nov. 30, 1931 Great Britain enacts Abnormal Importations Act, allowing the Board of Trade the ability to adjust duties up to 100% on any product it wishes.

Feb. 1932 Great Britain enacts Import Duties Act, imposing a general tariff of 10%.

Mar. 1932 Italy signs concession treaty with Spain, thereby negating the effects of the Wais Tariff on Italy.

Forgotten Facts About Smoot Hawley for the Buy American Crowd.

Much of the readily available information ties the Smoot-Hawley Tariff Act directly to a deepening of the Great Depression. Today, many of those who believe that national policy should be more directed to protecting American business from foreign competition minimize its impact by pointing out that foreign trade amounted to little more than 4% of GDP in 1928 and that Smoot-Hawley passed during an international deflation that followed a financial shock and that this, not rising tariffs, shrank GDP. These arguments carry substantial weight. However, neither argument accounts for the impact wrought on financial markets by the long process that culminated in protectionist tariffs. As protectionist policy slowly advanced in an accelerating export business climate, financial markets discounted prospects for industrial growth. Worldwide protectionism became a virtual certainty in October of 1929.

Certainly, modern financial scholars have devoted much thought to the proposition that financial markets are "informationally efficient," where the price traded assets reflects all known information. Yet, the thesis that financial markets look forward in discounting the impact of a salient event achieved acceptance in the financial industry at minimum the 1960’s. Less thought, therefore, focuses upon the movement of an efficient market in response to historical events. Certainly, notwithstanding the fixation of many modern investors, it is exceedingly difficult to accurately predict the impact of a set of information upon a fluctuating market. 20-20 hindsight always seems to work best. Looking back to the 1920’s armed with the modern thesis that markets are “informationally efficient,” however, stunningly reveals that financial markets discounted growth prospects in exports, as governments played an increasing role in regulating trade. To have a feel for this direct correlation, you need to view the financial markets with the eyes of 1920’s participants.

The 1920’s American political landscape differed substantially than the pervasive regulatory regime that exists today. Turn of the century “Progressivism” began an experiment with bringing to bear increasing federal power on an industry specific basis. Historically, the framers of the Constitution limited the power of the federal government to engage in industry specific economic activities. Other than the express power to impose tariffs on trade, the commerce clause, which permits “regulation of commerce between the states,” is the only express authorization federal intervention in private economic activity. Progressivism, however, stretched commerce power to a new meaning. In Swift v. United States (1905), the Supreme Court found that a local process, in that case a purchase of cattle, was part of a “stream” of interstate commerce and was therefore subject to federal regulation. Congress seized upon the “stream of commerce” construction to legislate on all manner of things not traditionally considered as commerce between the states. In this way, Progressivism lead to something akin to a federal economic police power.

At the outset, Bull Moose Progressivism promoted bringing federal power to bear on specific industries. Theodore Roosevelt broke new ground by intervention into the United Mine Workers strike of 1902. He employed a five member commission, rather than military power, to negotiate an end to the strike. Similarly, Woodrow Wilson established agencies such as the National War Labor Board during World War I, to promote a steady flow of war supplies by employing collective bargaining to prevent strikes. Thus, armed with the power to regulate commercial streams, the federal government increasingly employed the technique association between government and industry to promote industry specific policy.

In the early 1900’s the Republican Party generally shunned progressive solutions, while generally believing that high tariffs benefitted the growth of American businesses. Republicans swept into power in 1920 in the midst of a financial crisis. The Fed erred in 1919 in keeping rates too low to benefit the sale of Victory bonds. It then tightened excessively, creating a financial shock and depression from 1920 to 1921.

Reed Smoot, whose private career was in banking, was already the Republican Senator from Utah at this time. His election in 1903 was quite controversial because he was a Mormon. At that time, the Mormon community was highly involved in sugar beet and wool production. At the time of his election, the nation was operating under the Dingley Tariff of 1897, the highest in the nation's history. Smoot obtained an appointment to the Senate Finance Committee in 1908. When Democrats took the presidency and both houses of Congress in 1912, tariffs were sharply reduced.

The sixty seventh Congress enacted the Emergency Tariff Act of 1921 as a temporary measure until a more comprehensive measure could be drafted. Ultimately, Fordney-McCumber passed in 1922, imposing an ad valorem rate of 34%, higher than the previous high water mark of the Payne-Aldrich Tariff of 1909. Senator Smoot shepherded Fordney-McCumber through committee. In its final form, it included tariffs on Cuban sugar and wool. Fordney-McCumber, however, lacked a mechanism to adjust rates based upon a bilateral trade agreement. As a result, trading partners characterized U.S. trade policy as a “one way street.”

Notwithstanding the “pro-growth” Fordney-McCumber tariffs, the United States trade balance continued to decline until 1924. Regardless, the recovery from the 1920-1921 depression had proceeded smoothly with moderate price increases. Ad valorem tariff rates stayed basically stable during the 1920’s. The nation's total real income rose from 1921 to 1923 by 10.5% per year, and from 1923 to 1929, it rose 3.4% per year.

Much can be said about the conservative style leadership of Calvin Coolidge, when he succeeded to the Presidency upon the August 2, 1923 death of Warren Harding. He kept the Harding administration intact, including his Commerce Department Secretary, Herbert Hoover. The Coolidge's taxation policy was that taxes should be lower and that fewer people should have to pay them. Just before the 1924 Republican Convention began, Coolidge signed into law the Revenue Act of 1924, which decreased personal income tax rates.

In addition to tax cuts, Coolidge proposed reductions in federal expenditures and the retiring some of the federal debt. He declined to sign several Congressional spending bills. He likewise vetoed the proposed McNary-Haugen Farm Relief Bill of 1926, designed to allow the federal government to purchase agricultural surpluses and sell them abroad at lowered prices, declaring that agriculture must stand "on an independent business basis," and said that "government control cannot be divorced from political control." When Congress re-passed the McNary-Haugen bill in 1927, Coolidge vetoed it again.

Herbert Hoover was already a national figure and former Presidential candidate, when Coolidge assumed the Presidency. Although Hoover was a registered Republican, Woodrow Wilson privately preferred as his successor and as a Democratic Party presidential candidate in 1920. Hoover had bolted the Republican before, to support Theodore Roosevelt's "Bull Moose" Progressive Party in 1912. However, he chose not to run as a Democrat in 1920, because he believed that it would be a Republican year. He ran unsuccessfully for the Republican nomination, but later obtained the Secretary of Commerce post in the Harding administration. As Secretary, Hoover actively promoted the Commerce Department as the hub of the nation's growth and stability through European style “associationalism.” Coolidge called him “Wonder boy.”

Willis Hawley came to Congress from Oregon in 1907. He ascended to Chairman of the Committee on Ways and Means during the uneventful Seventieth Congress, which met during the last two years of the second Coolidge term.

American financial markets, it can be argued, began to reflect that focus upon exports was a valid corporate growth strategy, as opposed to simply taking market share from a domestic competitor. Generally speaking, our 1920’s European export markets still suffered from the devastation wrought by WWI and financial instabilities stemming from reparations. In order to react quickly to currency changes associated with reparations payments, governments remained empowered to introduce surtaxes or apply “coefficients of increase”. Additionally, domestic charges or regulations could undermine the value of the tariff commitment, and do so in a discriminatory manner. Likewise, discrimination at the border was in many cases obstructed by means of very detailed tariff specifications which limited the applicability of bilaterally-agreed tariff reductions for third parties. The number of bilateral trade treaties remained small up to 1925, and even when they started to increase, their duration remained short-term. As a result, a facile presentation of year over year European ad valorem rates fails to present the entire picture. Thus, in the 1925-27 time frame, both high tariff levels and tariff instability burdened international trade.

European international trade was returning to pre-War levels as the twenties progressed. Currency fluctuations became less of an issue, especially as Austria and Hungary employed balanced budgets. By the autumn of 1925, the French began to organize an economic conference to address what it deemed long term problems of German industrial predominance and dependence on inexpensive American food imports. This culminated in the International Economic Conference conducted under the auspices of the League of Nations in Geneva in May of 1927.

The American economy experienced historically high rates of productivity increases during the 1920’s. Several technical innovations matured into burgeoning production, which many economists saw as outstripping domestic consumption. The electrification of American production facilities greatly improved efficiency. Unforeseen by many who viewed productivity as outstripping demand, was a steadily increasing rate of export, especially in the auto industry. In 1927, for example, 95% of all automobiles worldwide were made in the USA. In that same year, autos amounted to one third of all US exports. Buicks, Packards, Fords and other American brands were all the rage throughout the world. Automobile exports advanced rapidly from 11% of total production in 1926 to 24% in 1927. American manufacturing was truly a growth story.

Underscoring the growing importance of exports to American Industry, President Coolidge sent a delegation, as opposed to simply observers, to the International Economic Conference, notwithstanding that the U.S. had not joined the League of Nations. In its final report on tariffs, the International Economic Conference committee declared that “The time had come to put an end to the increase in tariffs and to move in the opposite direction” through individual, bilateral and collective action. The Committee likewise condemned the fixing of exaggerated tariffs as a weapon in a trade war.

Concurrently, the American financial markets reflected the growth prospects that an export economy may bring. The Dow Jones Industrial Average advanced in 24 of 27 sessions beginning on July 1, 1927. This was the same week that Ford Motor Company was rumored to be introducing a new model with standard equipment including a self-starter, five wire wheels, speedometer, windshield wiper, gasoline gauge, oil gauge, dash light, Houdaille shock absorbers, four-wheel brakes, a 34-h.p. engine, a gearshift transmission, a 104-inch wheel base selling for $450 for the touring model and $490 for the four door sedan and coupé. In the following week, the International Chamber of Commerce, an organization of practical financiers and businessmen, called for continued movement toward smoothing international exchange of commodities transactions and breaking down or at least lowering national tariff walls. During the week of July 18, 1927, Chase National Bank of Manhattan announced that its total assets surpassed $1,000,000,000 to $1,042,513,993, of which $919,608,525 were deposits.

In an ill omen, the German stock market crashed while the International Economic Conference was ongoing. In the ensuing year, agricultural prices deflated precipitously. Thus, the League of Nations brokered tariff truce of 1927-28 and the build-up of a network of commercial treaties based on an unconditional MFN clause began to unravel. Agricultural prices internationally had been in decline for several years, likely because automobiles had supplanted much of the grain consuming livestock that once filled the center of the land transportation industry. The deflation that followed the German financial shock exacerbated this trend.

President Coolidge declined to run for reelection in 1928, leaving the door open for a Hoover candidacy. As Coolidge prepared to leave office, he quipped that, "for six years that man has given me unsolicited advice—all of it bad." Like in Europe, agricultural prices were falling in 1927 and 1928. Hoover employed a southern strategy by promoting an agricultural products tariff increase. Hoover carried 40 of 48 states. Republicans gained 30 seats in the House for 267-167 majority and 7 seats in the Senate for 56-39 majority. Thus, the international protectionist die was cast years before Smoot-Hawley came into existence.

In the midst of well publicized congressional hearings, our European trading partners more rapidly proceeded along a protectionist path. In 1928-29, France, Germany and Italy reacted quickly to support agricultural prices by raising tariffs. Similarly, The Fiat Company, Italy's leading automobile manufacturer, began pushing Italian government to increase duties on American automobiles and automobile parts, out of frustration for losing to rapidly increasing American imports. Likewise, in 1929, representatives from various Swiss industries begin circulating flyers encouraging the support of European automobiles and other products, while avoiding the support of American industries.

Against this backdrop, the following timeline reveals an apparent direct correlation between the realization that protectionist policies will be implemented, and the discounting of the potential corporate growth. The Dow Jones Industrial Average, it seems, rose when export growth seemed possible and fell with the likelihood of protectionist intervention.

December 4, 1928. The Dow Jones Average is at 291.30.

Dec. 5, 1928. The House Ways & Means Committee authorizes notice of public hearings on tariff. Fourteen subcommittees will take testimony, and hearings will cover all commodities. December 8, 1928. The Dow has fallen to 257.33.

The Dow remains range bound between 300 and 325 from the beginning of the year through May 30, 1929, reflecting the uncertainty about the form that tariffs will take.

Jan. 7, 1929. The House Ways & Means Committee begins hearings. Rep. Willis Hawley (R-OR) is chair.

Feb. 27, 1929. The House Committee hearings conclude, after nearly 20,000 pages of testimony and 1100 witnesses.

Mar. 4, 1929. Herbert Hoover is inaugurated as President. His inaugural address calls for limited tariff revisions.

March 8, 1929. Canada reacts to Hoover’s call for increased tariffs by proclaiming its Canada First policy. In the interests of Canadian industries, Canada will not seek to continue trading with the United States if it continues to show resentment and antagonism with regards to trade.

Apr. 15, 1929. President Hoover calls a special session of the 71st Congress to implement a policy of limited tariff changes to benefit farmers.

May 7, 1929. The Republican dominated House Ways & Means Committee writes a tariff bill without Democrat input. At this time, the points of contention remain confined, for the most part, to agricultural products: Agricultural states want higher rates on butter/casein/flaxseed and lower rates on brick/cement/lumber/shingles; California wants duties on figs/dates/hides/long staple cotton, and; the Northeast wants duties on boots/shoes/leather; etc. At this time, no official protests have been received from foreign nations.

May 23, 1929. Republicans on the Ways & Means committee members come up with ninety-one compromise amendments designed to guarantee Republican unity.

May 27, 1929. The Dow remains in its trading range, reaching a low for the year of 293.42.

May 28, 1929. The House passes the Tariff bill by a vote of 264-147, with only 12 Republicans against and 20 Democrats in favor. The bill increased average agricultural tariffs from Fordney-McCumber’s average of 25.85% to 29.90%. Tariffs on industrial products rose from 42.03% to 47.07%.

May 29, 1929. The Tariff Bill is referred by Senate to Finance Committee, where Reed Smoot holds the chair. Several Senators express reservations that the bill favors industrial concerns at the expense of farmers, who the tariff was originally intended to benefit.

June 13, 1929. The Senate Finance Committee begins its hearings.

June 17, 1929. Sen. Borah (R-ID) moves for “sense of the Senate” resolution to have tariff revision limited to agriculture. This measure fails by a vote of 39-38. President Hoover states publicly that he convened Congress in order to pass limited changes, but “in considering the tariff for other industries than agriculture, we find that there have been economic shifts necessitating a readjustment of some of the tariff schedules.”

June 19, 1929. Congress takes recess for summer. Senate Finance Committee continues working on tariff bill.

July 6, 1929. The Dow makes a new high of 344.66, advancing from 303.27 on June 10, 1929.

July 18, 1929. Senate Finance Committee hearings conclude, while international attention to the bill begins to mount. As of this time, 38 nations have sent formal protests to the Department of State.

July 22, 1929. Senate Finance Committee begins meeting in executive session to redraft bill.

July 29, 1929. The Dow remains in a range begun on July 6, 1929, hitting a low of 339.21.

September 3, 1929. The Dow reaches a new high of 381.17, a level it will not reclaim until 1955.

Sept. 4, 1929. Senate ends its summer recess and the Finance Committee reports the redrafted Tariff Bill to the Senate. The contents of the bill are now open to public inspection.

September 5, 1929. The Dow sells off to 369.77.

Sept. 12, 1929. Debate begins in Senate.

September 17, 1929. Signaling that more changes will be made, the Senate Finance Committee authorizes the use of corporate profits shown Treasury Department tax reports to assess the effect of the then present tariffs.

September 18, 1929. The Dow begins a down leg falling from 370.90 ending at 325.17 on October 4, 1929.

Oct. 2, 1929. The Senate passes an amendment that removes President’s ability to set flexible tariff schedules. Instead, Tariff Commission’s recommendations will be acted on by Congress. Signaling a defeat for the old guard favoring high tariffs, thirteen insurgent Republicans join 34 Democrats in passing amendment, 47-42.

October 4, 1929. The Dow rallies from 325.17 to 352.86 by October 10, 1929, but it falls back to 333.29 by October 18, 1929.

October 19, 1929. The Finance Committee Senate adds a debenture to the bill, which gives direct transfers to southern farmers, a move that appears to satisfy resurgent agricultural interests.

October 21, 1929. By a vote of 64 to 10, The Senate defeats the Thomas Recommittal Plan, which sought to limit tariff revision to farm products only. The Dow falls to 320.91 on high volume.

Oct. 22, 1929. Senate finishes debate on administrative provisions and it moves on to rates. The insurgent Republicans in coalition with Democrats take control of the process, passing a decrease on medicinal tanic acid, an industrial product, to .18. This was below that .22 in the House bill to .20 recommended by the Finance Committee. The vote is 45 to 33, a 12 vote margin. Passage of a Tariff in some form appears a virtual certainty.

October 23, 1929. The committee rapidly dispenses with rates on several items. 21 Nations have already made objections to the Tariff in its present form. The Dow falls to 305.85.

October 24, 1929. The Dow closes below the psychological barrier of 300 at 299.47 on high volume.

Oct. 29, 1929 Stock market crashes on Black Tuesday. The Dow-Jones Industrial Average drops 12% as 16.4 million shares are traded.

Nov. 22, 1929. Despite Hoover’s urgings, Senate adjourns without passing tariff bill.

Dec. 2, 1929. The 71st Congress, 2d session convenes.

December 7, 1929. The Dow battles back from a November 23, 1929 close of 198.69 to 263.46

Dec. 11, 1929. Former tariff lobbyist Joseph Grundy is appointed as Pennsylvania's junior Senator.

December 12, 1929. The Dow sells off to 243.14 from 258.44 the previous day. It continues falling, hitting a low on December 21, 1929 of 230.89 on high volume.

Jan. 17, 1930. Marking a defeat for Senator Hawley, after six days of debate, the Senate votes to reject House’s proposed tariff raises on sugar. Vote is 48-38; eighteen insurgent Rs join 29 Ds.

January 17, 1930. The Dow begins an advance from 246.84 to 268.56 on February 5, 1930. February 27, 1930. The Dow is 269.59.

March 4, 1930. The Dow has advanced to 273.51

Mar. 5, 1930 Amid charges of vote trading, Senate reverses position on sugar; 38 Rs and 9 Ds vote to raise sugar tariffs. The Dow inches down to 270.59.

Early Mar. 1930 Coalition of sugar, oil, lumber, and cement interests gain control in Senate; they start raising rates on numerous commodities, including items already voted on previously. The Dow rises from March 5 to a high of 276.85 on March 10, and then falls to 270.25 on March 15.

Mar. 22, 1930 Revision completed in Senate.

Mar. 24, 1930 Senate passes bill, 53-31. Five Rs vote against; 7 Ds vote for.

Apr. 2, 1930 Bill sent to conference committee. The House conferees are Oregon's Willis Chatman Hawley, Massachusetts' Allen Towner Treadway, New Jersey's Isaac Bacharach (all regular Republicans) and John Nance Garner of Texas, Mississippi's James William Collier (Democrats). The Senate conferees are Utah's Smoot, Indiana's Watson, California's Shortridge (regular Republicans) and North Carolina's Simmons and Mississippi's Harrison (Democrats). The conference voting will normally be 6-to-4 for high rates.

The Dow reached a high for the year of 294.07 on April 17.

April 17, 1930. The French pass a by weight Tariff on automobiles. Under the previous system, the ad valorem tariff on was $1,182 per car on Packards and on $677 on Buicks. Under the new tariff, $1,230 were to be assessed against each Packard and $1,189 against Buicks. Minister of Commerce Pierre Etienne Flandin remarks, "If others build tariff walls, France will build tariff walls!"

During the week of April 28, 1930, "President Hoover last week took a hand to speed the Tariff Bill to final enactment" by inviting conferees to a White House breakfast.

The Dow ends a sharp decline beginning on April 17, 1930 to 258.31 by May 3, 1930.

May 4, 1930 The New York Times publishes a letter sent by 1028 American economists to President Hoover asking him to veto tariff bill.

May 5, 1930. The Dow advances slightly on high volume.

May 19, 1930 Senate agrees to recede: debenture plan is struck down by 43-41 vote, and VP Curtis casts deciding vote after 42-42 vote on flexible provision.

May 29, 1930. The Dow advance beginning on May 5, 1930 stalls at 275.07.

June 9, 1930 After some back-and-forth between conference and Senate, completed conference report is filed. To date, 59 nations have sent formal protests to Congress in opposition of the Tariff. The Dow falls to 250.78.

June 13, 1930 Senators Reed and Grundy criticize conference report but decide to accept. Senate adopts conference report, 44-42.

June 14, 1930 House adopts conference agreement, 222-153. Vote is largely along party lines: only 14 Ds vote for, only 20 Rs vote against.

June 16, 1930 VP Curtis signs bill; bill is forwarded to Pres. Hoover. The Dow is at 249.69.

June 17, 1930 Pres. Hoover signs bill and issues signing statement.

June 18, 1930 Tariff goes into effect at 12:01 a.m. Word begins to travel through Switzerland to boycott American products. The Dow falls to 218.34, a decline of 8% in two days.

June 24, 1930. The Dow hits a low of 218.34.

June 30, 1930 Italy sharply increases its automobile tariffs.

July 22, 1930 Spain passes Wais Tariff of 1930, effective the next day.

Nov. 1930 France signs concession treaty with Spain, thereby negating the effects of the Wais Tariff on France.

September 10, 1930. The Dow has advanced to 245.09.

Sept. 17, 1930 Canada enacts Canadian Emergency Tariff, increasing tariffs virtually across the board by 50%.

September 17, 1930. The Dow begins a decline to 171.60 on November 10.

Summer 1931 France adopts quota system.

Nov. 30, 1931 Great Britain enacts Abnormal Importations Act, allowing the Board of Trade the ability to adjust duties up to 100% on any product it wishes.

Feb. 1932 Great Britain enacts Import Duties Act, imposing a general tariff of 10%.

Mar. 1932 Italy signs concession treaty with Spain, thereby negating the effects of the Wais Tariff on Italy.

Much has been said about whether Smoot-Hawley materially impacted the American economy, given that foreign trade amounted to only about 6% of GDP at the time. However, we can look at Real Exports to establish an upper limit on the effect of Smoot-Hawley. Real GDP declined by about 16.5% between 1929 and 1931. Over the same period of time, Real Exports declined $5.9 billion to $4.1 billion. This two year Real Exports decline amounts to about 1.7% of 1929 Real GDP.

The entire decline in Real Exports cannot be attributed to Smoot-Hawley retaliation, because as deflation took hold, and incomes in Canada and England decreased, exports decrease. Nevertheless, it is telling that Real Exports decreased rapidly in 1929-1930 by $1 billion year, followed by a slower decline of $.8 billion in 1930-1931. The data therefore supports that retaliation had an immediate effect. This correlates with the anecdotes appearing on the timeline appearing above listing the Spanish WAIFF Tariff Act, the Canadian Emergency Tariff Act, etc., all of which follow the implementation of Smoot-Hawley.

Because decline in real exports measures an aggregate expenditure, you need to apply a multiplier to account for the velocity of money. In this case, the most reasonable multiplier is 2. So the 30% decline in Real Exports from 1929 to 1931 probably accounts for a real GDP decline of 3.4% from 1929 to 1931. So, 21% of the 1929-1931 Real GDP decline is attributable to decreasing Real Exports.

Just to put some emphasis on the impact of the 1929 decline in real exports, consider what the evaporation of .97% of 2008 GDP, or 138.647 billion, would bring.

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