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“You only need to look at history and the lead up to the Great Depression to see what high tariffs can do for a country.”

Let’s look at history. In 1865 the United States economy was decimated from four years of civil war. In 1900, 35 years later, the United States had the greatest industrial economy on the planet. In addition, it had a rapidly growing middle class. During that period the US had the highest tariff rates in its history. High tariffs were a conscious government policy to protect developing American manufacturing from European competition and thereby create jobs for the rapidly expanding population. Not only did the high tariff policy work, tariff and duty revenue fully funded the federal government.

Now let’s look at the Great Depression. The Smoot Hawley tariff bill did not cause the Depression, it was passed in 1930’ after the financial crash of 1929 and after the agriculture depression which began in 1926. Remember agriculture was much more important to the economy in that era.

In 1929, total foreign trade contributed 5% of GDP. Half of that trade was agricultural and the rest industrial.

From 1929 to the bottom of the Depression in 1932, US GDP declined by 50%.. Trade declined by an approximately equal amount. Therefore at most trade contributed 2.5% of the 50% decline in GDP. Clearly there were much more significant causes of the Depression, chief among which was the significant contraction of the money supply by the Federal Reserve. The contraction of the money supply resulted in the collapse of the banking system and the removal of credit from the economy which in turn resulted in the bankruptcy and closing of many businesses and loss of jobs. The decline in number of businesses and jobs decreased demand for goods and services causing a vicious cycle with more businesses closing and more jobs lost. The truth is, trade at 5% of GDP was not an important enough factor in the US economy, when the tariff was passed in 1930, to cause a 50% decline in the nation’s economy.

Now fast forward to 2008. The US economy experienced a financial meltdown and collapse in demand despite the lowest tariffs, and highest trade levels, in its history. This was more proof a rapid collapse in demand for consumer and industrial goods can occur in an economy without trade policy being a factor.

The myth about tariffs being the cause of the Great Depression of the 1930’s has been touted by globalists for decades. The economic data from the period does not back them up.