Hoover signed the bill 18 months after deliberations began, and at the early beginnings of the Great Depression. The stock market was in a shamble after crashing and the world economy was sagging. It didn’t take long for America’s biggest trading partners to retaliate.
Canada struck first after Smoot-Hawley raised the tariff on a dozen Canadian eggs from 8 cents to 10 cents. It backfired on the egg producers and started the snowball rolling down the hill on all other goods.
According to American Trade Policy, other countries retaliated, and world trade shrank enormously. By the end of 1934 world trade had plummeted by some 66 percent from the 1929 level. Response to the tariff internationally became a domestic problem that required a reaction from each country.
Figures from the Foundation for Economic Education showed U.S. iron and steel exports decreased 85.5 percent by 1932 due to retaliation by Canada. European retaliation raised tariffs so high that U.S. exports declined from $541 million per year to $97 million by 1933, an 82 percent drop.
From 1929 to 1933 American exports declined from about $5.2 billion to $1.7 billion, and the impact was concentrated on agricultural products such as wheat, cotton and tobacco. As a result, many American farmers defaulted on their loans, which in turn particularly affected small rural banks.
Smoot-Hawley Tariff Act of 1930 sent the country into a tailspin as hundreds of thousands were homeless and soup kitchens became a source of meals. (Library of Congress)
Two years later its signing, unemployment had reached almost 24 percent in the U.S., more than 5000 banks had failed, and hundreds of thousands were homeless and living in shanty towns called “Hoovervilles”