In October 1913, the United States broke with a solid 124-year-old protectionist tradition and enacted the Underwood-Simmons Tariff Reduction Act, lowering import tariffs by an average 5.1 percentage points. Eight months later, in June 1914, World War One was triggered; but nobody ever thought of blaming America’s flirtation with “free trade” for the Great War.
In June 1930, the United States enacted the Smoot-Hawley Act that raised import tariffs by an average 3.6 percentage points. The stock market had already crashed eight months earlier, in October 1929, triggering the Great Depression. Yet there are people who to this day blame the Great Depression on the “protectionism” of the supposedly protectionist Smoot-Hawley Act that took effect long after the Great Depression had begun.
Raising tariffs does not cause depressions, any more than lowering tariffs causes war. Continue reading