It has been argued that the Smoot-Hawley series of tariffs did enormous damage to the economy during the Great Depression. The pro-globalist interpretation of the historical facts is that because America imposed massive tariffs, and other nations retaliated, this led to serious damage to the economy.According to the pro-globalist story, Smoot-Hawley caused, or exacerbated, the Great Depression because it severely impaired global trade.
The problem is, factually, this is simply not true.
1) The nation’s GDP fell by almost half (46%) - and this affected international trade, not the other way around. We lost jobs, people stopped producing, and what little we produced, was being consumed here. And with other nations suffering as badly or worse than we were, they were in no position to buy anything from us. Which meant that their retaliatory tariffs were redundant when it comes to their effect upon trade. International trade was hindered because whole nations’ economies took a nosedive. Not the other way around.
2) There is another factor that pro-globalists do not consider when arguing that Smoot-Hawley caused (or exacerbated) the Depression. This factor is almost never even brought up by anti-globalists. History shows that when Smoot-Hawley was passed, the United States was not running the kind of monster $250 billion annual non-oil ($500 billion with oil imports) trade deficit that we are running today. The United States, at the time, was running a slight trade surplus for most of the Depression years. Think about it. Exporting goods generates more domestic jobs, and better-paying domestic jobs, than importing goods. If you pass massive across-the-board tariffs when you are exporting more goods than you are importing, and everyone else retaliates, you stand to lose your net export activity. You stand to suffer a net loss of jobs.IN THEORY; this did not really happen in the Great Depression because the jobs had already disappeared. Now, if you are importing far more than you export, you stand to lose imports - and you also stand to end a situation where domestic factories are closing down to move overseas.
If Smoot-Hawley was ever going to do even the slightest harm to the United States economy, the only time it would ever do so is if the United States is running a trade surplus: that means, Smoot-Hawley can only ever hurt the economy if we are exporting more than we are importing. Again, that is not the case today. We are importing more than we are exporting, and we are bleeding jobs out of the country as a result.
Ever wonder why China has succeeded so well? They slapped heavy tariffs on American products, for one. They also devalued their currency, for two. South Africa is also raising other, de facto trade barriers (“buy local”), and it’s working marvelously for them. Yet globalists say that trade barriers won’t work for America?
3) Finally, there is one last factor that the pro-globalists are wrong about: none of the anti-globalists are calling for an across the board shutdown of imports that Smoot-Hawley was aiming for. What we want is to reduce the trade deficit to zero. America runs the largest trade deficit of any country in the world, and we run a net trade deficit with almost every major country in the world. We are bleeding out more jobs than any other nation in the world. A $250 billion non-oil trade deficit is deadly, and it is most certainly unsustainable. Trade deficits like what America is running, have a direct impact on the national debt - $250 billion (much less $500 billion) annual trade deficits make the national debt grow. And you cannot stop this type of debt growth by cutting domestic spending. Moreover, trade deficits of the magnitude that America is running, also devalue the United States dollar.
Here is the ultimate reality that pro-globalists do not want to discuss.These trade deficits will end. There is getting around this. They will end. The question is whether they end with laws that act to balance out trade, or they end when the deficits destroy our economy - and all the other economies (such as China) that depend on exports to America.
There’s only so far an economy can go by bleeding another nation’s working class of their jobs.
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