Did the Smoot-Hawley tariff cause the Great Depression?

Economists and historians widely regard it as a policy misstep, but the best-known voices in the debate, from Milton Friedman to Paul Krugman, do not call it the main cause of the Depression; the argument is over whether, and how much, it made things worse. The Tariff Act of 1930, named for Senator Reed Smoot and Representative Willis Hawley, raised tariffs on over 20,000 imported goods to shield American industries from foreign competition. It was signed on June 17, 1930, into a Great Depression that had started in October 1929.

The warning signs were loud. In 1927 a League of Nations conference had concluded that "the time has come to put an end to tariffs". In May 1930 a petition signed by 1,028 economists asked President Hoover to veto the bill, and it was ultimately signed by over 1,250. Hoover signed it anyway, against the advice of many senior economists, yielding to pressure from his party and business leaders.

Then partners hit back. Canada, the most loyal trading partner of the United States, put new tariffs on 16 products that made up about 30% of US exports to Canada. American exports to countries that protested fell by 18%, and exports to those that retaliated fell by 31%. Between 1929 and 1934, world trade fell by some 66%.

The catch is cause and effect. Most of the decline in trade was due to a plunge in GDP in the US and worldwide, with an additional decline beyond that. Milton Friedman argued that the 1930 tariffs caused harm but were not the main cause of the Depression, blaming insufficient action by the Federal Reserve, while other economists contend the tariffs exacerbated it, in part through retaliation. The politicians did not escape either: Smoot was one of 12 Republican senators who lost their seats in the 1932 elections.