Yea, the problem is that there is no data to back up this presumption. The increase in US trade tariffs was far greater under the Fordney-McCumber Act of 1922, and we had eight years of a pretty good economy. We had higher tariffs in 1909.
The “conventional wisdom” surrounding Smoot-Hawley is more of the rampant BS that poses as economic theory in the US. The truth is that trade collapsed in the time after S-H for the same reason that trade collapsed even *harder* in 2008 to early 2009: the collapse of the banking system worldwide. In 2008, we had loaded ships that could not leave port because the shipping company could not get a letter of credit from bankers for the purchaser of the products. So the products were not leaving ports. That’ll slow trade down a little, and it had nothing to do with tariffs. The fall-off in trade in 2008 to early 2009 was harder and faster than the fall-off following the passage of Smoot-Hawley, and we had no tariffs enacts by anyone, anywhere.
The truth is this: In the days of Fordney-McCumber and Smoot-Hawley, nations retaliated by raising or lowering their own tariffs. We had tariff acts about every eight or nine years in the US Congress, and the tariffs we’ve mentioned here actually had lower rates than tariffs passed a decade+ earlier in the Congress. Tariff rates went up and down in response to the various political winds blowing across the world markets.
Today, nations respond to world events by devaluing their currencies (eg, look at Japan’s actions on the value of their yen in the last couple of years, China’s actions over the last decade, the EU’s actions when the Euro got too strong). Instead of using tariffs to manipulate trade, nations now use their currencies.
“Free trade” is one of those fairy tales that parents tell their children when they want them to grow up to be economists and have a nice cushy job in a university with no accountability and a fat retirement pension.
And the truth of why we had a global depression in the 30’s is why we’re sleepwalking through one now: The banking system world-wide imploded. Back then, as now, the European banks were in far worse shape than US banks, and they didn’t have a central authority to manage the banking crisis. The Fed accelerated the crash of the banking system by first raising rates, then meddling in the banking sector. As Bernanke told Milton & Rose Friedman at a dinner held for the Friedmans: “You were right. We (the Fed) did it.”
If a foreign nation chooses to subsidize their exports and unfairly undercut our domestic industries then, as Friedman counseled, domestic customers should simply express their gratitude for the lower prices and buy the cheaper product.