The Trump administration is scheduled to raise tariffs on Chinese imports on Sunday to rates not seen since the notorious Smoot-Hawley tariffs enacted in 1930.
The tariffs did not start the Great Depression, which began a year earlier, but they are widely believed by economists to have worsened the economic troubles of the next decade.
“It’s a very fair comparison as far as the percentage of tariffs on Chinese imports alone is concerned,” said Welles Orr, a trade policy adviser and an assistant U.S. trade representative during the George H. W. Bush administration. “This is indeed a targeted Smoot-Hawley action aimed squarely at China. Like 1930, the U.S. is seeking to keep Chinese imports out — pure and simple.”
Should the economy take a hit, the tariffs will make the blow that much worse, Orr said: “Smoot-Hawley dramatically slowed down economic activity — not unlike if we go into recession and Trumps keeps tariffs on or ratchets them up further.”
The administration currently has 25% tariffs on $250 billion worth of goods imported from China. On Sunday, 15% tariffs on an additional $300 billion worth of goods will go into effect. On Oct. 1, the 25% tariffs will rise to 30%, with exceptions for some products, mainly consumer electronics. On Dec. 15, those exceptions will expire, and that rate will become 30% across the board.
That’s comparable to rates under Smoot-Hawley, economists and trade policy experts say. The key difference is that Smoot-Hawley covered all imports, while the Trump ones focus on China exclusively. But you have to go back to Smoot-Hawley to find tariffs as comprehensive as what President Trump is attempting.
“The jury is completely out that the current actions and threatened actions will do anything to help US consumers — quite the contrary. History repeating itself!” Orr said.
The comparison is a bit tricky to make because Smoot-Hawley did not set specific rates. It was primarily meant to protect U.S. agriculture and set varying levies based on the volume and weight of imported products. A 1998 study published in the Review of Economics and Statistics put the average rate at 21% when the tariff was first enacted. The average rose to 25%, its height, in 1931.
Chad Bown, senior fellow at the Peterson Institute for International Economics, said Tuesday that the average U.S. tariff on imports from China will rise to 21% on Sunday, up from 18% currently. It will rise to 22% in October and to 24% on Dec. 15, when the current exceptions expire.
“Smoot-Hawley provides a good reference point to give people a sense that these tariffs are very high,” said Simon Lester, trade policy analyst with the Cato Institute.
The 1930 tariff plan was authored by Utah Sen. Reed Smoot, the chairman of the Finance Committee, and Oregon Rep. Willis Hawley, the chairman of the Ways and Means Committee. The legislation was intended to protect U.S. farmers from lower prices caused by overproduction and cheaper imports of agricultural goods from Europe, which was finally recovering from World War I.
The comparison between those tariffs and Trump’s China tariffs are not quite apples-to-apples, noted Gary Hufbauer, a nonresident senior fellow at the Peterson Institute. “Smoot-Hawley hit all US imports, and was imposed when the US economy was already in a steep decline, whereas the China tariffs hit about a fifth of US imports, and are imposed when the US economy is brisk,” he commented via email.
Hufbauer nevertheless said the comparison is fair because the Trump administration is trending in the same direction as the 1930 protectionist action: keeping certain imports out entirely. “Trump may back off or reach a limited deal with Chinese President Xi Jinping during the next week, but the surprise would be a major de-escalation,” he said.
Currently about half of all of U.S. imports from China are covered by tariffs instituted under the Trump administration. That will rise to 69% on Sunday, and 97% by mid-December.
That has big business nervous. “While we agree with the Trump Administration that China needs to change its unfair trade practices, the current tool of tariffs has simply not worked, and a year into this trade war, economic data clearly signals the current and projected negative impact. Presidents Trump and Xi must recognize the repercussions of continued escalation,” said Jason Oxman, president of the Information Technology Industry Council, in a statement to the Washington Examiner.
