AI Steelman Smoot-Hawley Impact on the Depression

[jross]

Friendly reminder to us all that AI can sound incredibly convincing until you know the subject well enough to see the errors.

 

Here's a steelman argument for why the Smoot-Hawley Tariff Act of 1930 did not cause the Great Depression:

 

The Great Depression was a complex, multifaceted event with roots that predate the passage of Smoot-Hawley. While the tariff act is often blamed for exacerbating or even triggering the economic downturn, a closer look reveals that its impact was likely overstated. First, the decline in economic activity had already begun by mid-1929—industrial production peaked in July, and the stock market crashed in October—well before Smoot-Hawley was signed into law in June 1930. This suggests that deeper structural issues, such as overproduction, uneven wealth distribution, and a fragile banking system, were already driving the economy toward collapse.

 

Second, the tariff’s effect on international trade, while significant, was not catastrophic enough to single-handedly cause a global depression. U.S. imports and exports combined accounted for only about 8-10% of GDP at the time, meaning domestic factors dominated economic activity. Even if Smoot-Hawley reduced trade by raising tariffs on over 20,000 goods, the volume of trade affected was relatively small compared to the broader economy. Historical data shows that U.S. exports fell from $5.2 billion in 1929 to $1.7 billion in 1933, but much of this decline can be attributed to the global downturn already underway, not just retaliatory tariffs from trading partners.

 

Third, the retaliatory tariffs from other nations—often cited as a key mechanism by which Smoot-Hawley worsened the Depression—were not as widespread or immediate as critics claim. Many countries had already begun adopting protectionist policies in the 1920s, and their responses to Smoot-Hawley were often more symbolic than economically devastating. For instance, Canada, a major U.S. trading partner, did shift some trade to the British Empire, but its overall economic contraction was tied more to falling commodity prices than to Smoot-Hawley alone.

 

Finally, monetary policy failures, particularly the Federal Reserve’s decision to tighten credit and allow thousands of banks to fail, played a far larger role in deepening the Depression. The contraction of the money supply by nearly a third between 1929 and 1933 choked investment and consumer spending, dwarfing the impact of trade disruptions. In this view, Smoot-Hawley was a misguided policy that worsened an already bad situation, but it was neither the spark nor the primary fuel for the Depression’s fire.

 

In summary, the steelman case is that Smoot-Hawley was a scapegoat—a high-profile but secondary factor in a crisis driven by pre-existing economic weaknesses and catastrophic domestic policy failures. Blaming it for the Depression oversimplifies a much larger and messier story.

[jross]

Here’s a steelman argument for why the Smoot-Hawley Tariff Act of 1930 exacerbated the Great Depression:

 

While the Great Depression was already underway by the time Smoot-Hawley was enacted in June 1930, the tariff significantly worsened the economic collapse by disrupting global trade at a critical moment. The legislation raised U.S. tariffs to historic highs—averaging around 20% on dutiable imports and affecting over 20,000 goods—making foreign products prohibitively expensive. This didn’t just hurt U.S. consumers; it triggered a cascade of retaliation from trading partners, shrinking the global market for American goods precisely when the economy needed every possible avenue for recovery.

 

The impact on trade was immediate and severe. U.S. exports, which had been a lifeline for industries like agriculture and manufacturing, plummeted from $5.2 billion in 1929 to $1.7 billion by 1933—a drop of over 60%. Imports fell similarly, from $4.4 billion to $1.4 billion. While some of this decline stemmed from the broader global downturn, Smoot-Hawley accelerated the collapse by inviting tit-for-tat tariffs from dozens of countries. Canada, for example, imposed steep duties on U.S. goods and redirected trade toward the British Empire. European nations, already struggling with war debts and economic instability, followed suit, erecting their own barriers. This shrank world trade by an estimated 25% between 1929 and 1933, turning a national recession into a global catastrophe.

 

Domestically, Smoot-Hawley hit key sectors hard. American farmers, already reeling from overproduction and falling commodity prices, saw export markets vanish—wheat exports, for instance, dropped by nearly half. Manufacturers faced higher input costs for raw materials and lost foreign customers, leading to layoffs and factory closures. These effects rippled through the economy, deepening unemployment and reducing consumer spending power when recovery demanded the opposite.

 

Moreover, the tariff undermined confidence at a fragile moment. The stock market, which had briefly rallied after the 1929 crash, took another hit as Smoot-Hawley loomed, with investors fearing a trade war. Business leaders and economists—over 1,000 of whom signed a petition urging President Hoover to veto the bill—warned of its dangers, and their predictions proved prescient. The policy signaled American retreat from global cooperation, amplifying uncertainty and discouraging investment.

 

Critics might argue that monetary policy failures or pre-existing weaknesses were the Depression’s true drivers, but Smoot-Hawley poured fuel on the fire. It wasn’t the sole cause, but it turned a manageable downturn into a deeper, longer-lasting crisis by choking trade, inviting retaliation, and eroding economic stability when resilience was most needed. In this view, it’s not just that Smoot-Hawley happened during the Depression—it actively made it worse.

[jross]

The steelman arguments for each case—"Smoot-Hawley did not cause the Depression" and "Smoot-Hawley exacerbated the Depression"—appear strongly different because that’s the nature of steelmanning: it involves constructing the strongest possible version of a position, even if it means emphasizing different facts or interpretations.

 

For the "did not cause" case, I leaned into the timeline of the Depression’s onset, the relatively small share of trade in GDP, and the dominance of monetary policy failures. For the "exacerbated" case, I highlighted the tariff’s role in shrinking trade, triggering retaliation, and worsening domestic conditions. These arguments diverge sharply because they’re designed to stand as robust, standalone defenses of opposing views, not to reconcile with each other.

 

As for the "real truth" of Smoot-Hawley’s impact, it’s messy and lies somewhere between these extremes—history doesn’t offer a single, tidy answer. Most economic historians agree the Depression had multiple causes: a speculative stock market bubble, massive income inequality, overproduction, and a banking system prone to collapse, all compounded by the Federal Reserve’s disastrous tightening of the money supply. Smoot-Hawley entered this already chaotic picture, so pinning down its exact role is tricky.

 

The consensus view is that Smoot-Hawley didn’t cause the Depression—the downturn was well underway before June 1930—but it likely worsened it to some degree. Trade data backs this: U.S. exports and imports cratered after 1930, and global trade volume fell sharply. Studies, like those from economist Douglas Irwin, suggest the tariff explains part of this decline, though not all—maybe 20-30% of the trade drop, with the rest tied to the global slump. Retaliatory tariffs from countries like Canada and France amplified the effect, but their impact varied by region and wasn’t always as severe as popularly claimed.

 

Quantitatively, trade was only 8-10% of U.S. GDP, so even a big hit to exports couldn’t have been the sole driver of a 30% GDP collapse. Compare that to the money supply shrinking by a third or 9,000 bank failures wiping out savings—those were bigger blows. Qualitative evidence, like contemporary accounts and the 1,000+ economists opposing the bill, suggests Smoot-Hawley damaged confidence and strained international relations, but it’s hard to measure how much that mattered.

 

The "real truth" is probably this: Smoot-Hawley was a bad policy at a terrible time, amplifying an existing crisis without being its root. It’s like throwing a punch at someone already falling down—painful, but not what knocked them off their feet. The debate persists because its effects are entangled with everything else that went wrong, making it a perfect scapegoat for some and a footnote for others. Without a counterfactual—no Smoot-Hawley world to compare—we’re left with educated guesses, not gospel.

[red viking]

Primary or secondary, tariffs have a well established history of not being effective, particularly when they escalate to a trade war. That's almost always a net loss for everybody. 

These are much higher than the tariffs on the u.s. They're based on trade deficits rather than what we're actually being charged. 

[scourge165]

28 minutes ago, jross said:

First, the decline in economic activity had already begun by mid-1929—industrial production peaked in July, and the stock market crashed in October—well before Smoot-Hawley was signed into law in June 1930.

This is where I'd jump in and point out that Trump's tariffs have not yet gone into effect...and yet, what's happening?

Congress passed Smoot-Hawley in May of '29. That's...JUST before "Mid 1929."

 

Beyond that, I've already had the discussion, debate. Unemployment went from ~1% at passage to 12% by the end of the year to 15% within 7 months and inflation...well, that actually went to -10% as there was nobody to buy goods and the US was hit with reciprocal tariffs. 

 

But alright... I believe if you do not implement Smoot-Hawley, my Grandparents would have grown up in a VERY bad recession. Probably worse than the housing recession. 

-I think it's indisputable that Smoot-Hawley made things exponentially worse.

 

What I hope any reasonable person could at the VERY least understand is that saying it had a "negligible" effect is objectively false and absurd and that it was VERY bad. And not only replicating that, but surpassing it, is just a terrible idea. 

[jross]

AI responds:

The House of Representatives passed its version of the bill (H.R. 2667) on May 28, 1929. The Senate took longer, debating and amending it extensively, and didn’t pass its version until March 24, 1930. After that, the two chambers had to reconcile differences in a conference committee, which finalized the bill in early June 1930. Congress as a whole—the combined House and Senate—officially passed the reconciled bill on June 13, 1930, and President Hoover signed it into law on June 17, 1930.

Scale of Impact

• Short-Term (May ’29): Minimal direct impact—more psychological than material. Trade didn’t collapse overnight; the bill still faced a year of Senate wrangling. But it amplified uncertainty in a bubble about to pop. Think of it as a tremor, not the quake.
• Long-Term Setup: The House vote locked in momentum. By the time the Senate passed it in March ’30 and Hoover signed it in June, markets had been stewing on it for months. Some argue (e.g., economist Allan Meltzer) that prolonged debate worsened the ’29 crash’s fallout, though hard proof’s elusive.

So, in May 1929, Smoot-Hawley’s impact was real but indirect—rattling nerves, shifting plans, and priming the pump for worse to come. It wasn’t law, so no tariffs bit yet, but the signal mattered. Compare it to now: Trump’s 2025 tariffs aren’t in full swing, yet Canada’s already hitting back. Same vibe—anticipation can hurt before the ink dries. 

[jross]

26 minutes ago, scourge165 said:

Beyond that, I've already had the discussion, debate. Unemployment went from ~1% at passage to 12% by the end of the year to 15% within 7 months and inflation...well, that actually went to -10% as there was nobody to buy goods and the US was hit with reciprocal tariffs. 

AI continues
 

Fair point—Trump’s tariffs, the big 25% ones on Canada and Mexico and 20% on China, aren’t fully in effect yet; they’re set for May 1, 2025, and we’re already seeing chaos. Canada’s slapped 25% on $20.7 billion of U.S. goods since March 13, China’s upped theirs to 34% as of April 4, and markets are freaking out before the ink’s dry. It’s a good parallel to question—what’s happening before the tariffs even hit?

 

But your Smoot-Hawley timeline’s off a bit. Congress didn’t pass it in May ’29—that’s when the House voted, May 28, 1929. The full Congress, House and Senate together, passed it June 13, 1930, signed into law June 17. Mid-1929’s decline—industrial peak in July, crash in October—was already rolling before that House vote even happened. So, it’s not “just before mid-1929” for the law; the House move was early, but the real deal was over a year later.

 

Your unemployment jump—~1% to 12% by year-end, 15% in seven months—and inflation to -10%? That doesn’t track with May ’29 either. Unemployment was around 3% in early ’29, crept to 5-6% post-crash by December, hit 9% by late ’30, and 15% by mid-’31—way past seven months from the House vote. Deflation got to -10% in ’32, not ’29. The crash and pre-tariff slump drove that early pain, not the House passing it. Reciprocal tariffs—Canada, Europe—didn’t bite ‘til late ’30, after the law.

 

The anticipation angle’s real, though. The House vote in ’29 spooked markets—exporters worried, stocks got shaky. Could’ve primed the pump for October’s crash, like some say about Trump’s threats now. But the big unemployment and deflation you’re citing? That’s post-June ’30, when tariffs actually hit and trade tanked—$5.2 billion in exports ’29 to $2.9 billion ’31. Smoot-Hawley made it worse, no doubt—just not right off the May ’29 bat.

[jross]

Is the Trade War Worth It?

Hard to call it “worth it” so far. Trade wars, like Smoot-Hawley in 1930, tend to backfire, shrinking trade and hurting all sides. In 2025, Trump’s tariffs—10% baseline on all imports (April 5), 25% on Canada/Mexico, 34% on China (April 9)—aim to fix a $1.2 trillion trade deficit and boost U.S. jobs. But Canada’s 25% on $20.7 billion of U.S. goods (March 13) and China’s 34% (April 4) are hitting back hard, and global trade’s already down 15% this year (WTO). Tax Foundation pegs U.S. household costs at $1,900 from these hikes—tough to swallow when prices are up and growth’s slowing (RSM estimates a 0.36% GDP hit). The jury’s out on long-term gains, but right now, it’s a lot of pain for uncertain reward.

 

Is It Working?

Not clearly, not yet. Trump’s goal—cut deficits, bring jobs home—hasn’t landed. The deficit’s still massive—$1.2 trillion in 2024—and while first-term tariffs (2018-19) added maybe 1,000 steel jobs (EPI, 2023), they cost 300,000 elsewhere (Fed, 2019). In 2025, Canada and China’s counter-tariffs are slamming U.S. exporters—soybean farmers lost $27 billion since 2018, and manufacturers are scrambling. The commenter’s “net loss” point holds: escalation’s driving higher costs (2.3% price bump, Budget Lab) without shrinking the deficit or sparking a factory boom. Supply chains are shifting—some to Vietnam, not the U.S.—but that’s not “working” as planned.

 

Has the U.S. Benefited Yet?

It’s a mixed bag. On one hand, steel’s scoring wins—Hyundai’s $5.8 billion Louisiana plant (2025) shows tariffs can draw investment and jobs, a tangible boost for U.S. industry. Trade diversion’s happening too—China’s export share to the U.S. dropped 3% since 2018 (NBER, 2022), nudging some production closer to home. Politically, Trump’s base is energized—his “Liberation Day” (April 2) pitch fuels a sense of American grit. On the flip side, the costs are real: inflation’s up, stocks slid, and Canada’s 25% and China’s 34% counter-tariffs are biting U.S. exporters hard. Retaliation’s outpacing us—and while there’s progress, it’s tempered by the broader economic squeeze.

Bottom Line

It’s a bold play with stakes on both sides—short-term hits like higher costs and lost exports are real, but the seeds of long-term wins—more jobs, a leaner deficit—are planted. Worth it? Hinges on whether the economic grit pays off over the political flex. Working? Not fully, but it’s early. Benefits? Enough to keep hope alive, with room to grow if the tide turns.

[Offthemat]

Who’s Al Steelman?  How many depressions did the Fordney-McCumber tariffs cause?

[scourge165]

8 minutes ago, jross said:

But your Smoot-Hawley timeline’s off a bit. Congress didn’t pass it in May ’29—that’s when the House voted, May 28, 1929. The full Congress, House and Senate together, passed it June 13, 1930, signed into law June 17. Mid-1929’s decline—industrial peak in July, crash in October—was already rolling before that House vote even happened. So, it’s not “just before mid-1929” for the law; the House move was early, but the real deal was over a year later.

Yes, I understand it still had to go through the Senate and then Hoover had to sign it with...over 1000 economists pleading with him not to, but when you indicate you're going to start a trade war...that starts uncertainty. 

This also comes just...maybe 2 years after the League of Nations(which famously we pushed to create under Wilson and then never joined) met specifically on the topic of tariffs and free trade...which we'd been working toward through the 1920s.

12 minutes ago, jross said:

Fair point—Trump’s tariffs, the big 25% ones on Canada and Mexico and 20% on China, aren’t fully in effect yet; they’re set for May 1, 2025, and we’re already seeing chaos. Canada’s slapped 25% on $20.7 billion of U.S. goods since March 13, China’s upped theirs to 34% as of April 4, and markets are freaking out before the ink’s dry. It’s a good parallel to question—what’s happening before the tariffs even hit?

Those are the big ones...and China is actually 54%. Collectively tariffs are SET to be higher now than they were at anytime since the the teens...maybe 1920 at just under 25% on all imports coming into the Country. 

Japan, South Korea, we're hitting EVERYONE(but Russia). Taiwan got 32%...though they exempted semiconductors for now, though they've said those are coming(among other industry). That's the industry that had thrived the most and is arguably the most important to the future Economy. 

 

25 minutes ago, jross said:

Your unemployment jump—~1% to 12% by year-end, 15% in seven months—and inflation to -10%? That doesn’t track with May ’29 either.

No, that tracks with the actual signing just as we haven't seen an IMMEDIATE jump in unemployment in (and they didn't keep track of unemployment prior to the crash, it's more of an approximation by the BLS).

But I'm not saying it "tracks with May of 1929." I'm saying from the time they end up signing it.

They mostly used the participation rate, but...sure. In EVERY example I've spoken about the tariffs, I've pointed THIS sequence of events;

 

1-US Congress passes Tariffs
2-Markets tank
3-Hoover signs Smoot-Hawley into Law
4-There's a MASSIVE spike in unemployment and we're in the throes of a recession that would BECOME the great depression within a 18 months. 

 

Go from Low to SUPER low unemployment, that sequence has not changed. That IS how it played out. That's OBVIOUSLY not the full totality of it, but people have already complained about my "essays." And I've gone through this...several times.

 

Catalyst-Tarrifs

That sets off the market, that resets a decade of growing global commerce and lowering tariffs moving toward free trade, that leads to a run on the banks and everything else.

 

 

44 minutes ago, jross said:

Unemployment was around 3% in early ’29, crept to 5-6% post-crash by December, hit 9% by late ’30, and 15% by mid-’31—way past seven months from the House vote.

Right. Which is why when I've pointed out unemployment, AGAIN, I've used from when Hoover signed it....every time.

46 minutes ago, jross said:

Could’ve primed the pump for October’s crash, like some say about Trump’s threats now. But the big unemployment and deflation you’re citing? That’s post-June ’30, when tariffs actually hit and trade tanked—$5.2 billion in exports ’29 to $2.9 billion ’31.

Yes. From the time Hoover actually signed it. Going back to what I believe was the catalyst. 

 

I also believe we were at over 7B in exports and it dropped about 65% over the next 3 years. 

[scourge165]

1 hour ago, jross said:

Scale of Impact

• Short-Term (May ’29): Minimal direct impact—more psychological than material.

The entire economy is built on the psychological. 

As much then as it is now. At LEAST then you could exchange that dollar for Gold.

Now, Fiat currency. That dollar has value for ONE reason. We agree and believe it does. 

-The run on the banks. That was psychological. 

 

By open tomorrow, we're going to be down ~20% in 3 days trading days. That's taking us back to 2021 levels and it has not been ONE WEEK since he has announced the tariffs. Not a single week. 

1 hour ago, jross said:

Think of it as a tremor, not the quake.

What causes the quakes?

[scourge165]

50 minutes ago, Offthemat said:

Who’s Al Steelman?  How many depressions did the Fordney-McCumber tariffs cause?

You mean the tariffs where the US gave huge loans to Europe in order to buy from American agriculture which led to the league of Nations meeting, the over-production of agriculture and eventually to what Hoover asked for? Targeted tariffs to protect agriculture?

 

And after saying Smoot-Hawley had a "negligible" effect on the crash and depression, I honestly don't know if you're serious in asking who "AI Steelman" is?

[jross]

59 minutes ago, Offthemat said:

Who’s Al Steelman?  How many depressions did the Fordney-McCumber tariffs cause?

art. intelligence 

[Offthemat]

It was in jest.  Does Al claim that Fordney-McCumber was the real cause of the depression, as @scourge165 does?

[scourge165]

4 minutes ago, Offthemat said:

It was in jest.  Does Al claim that Fordney-McCumber was the real cause of the depression, as @scourge165 does?

Oh...was it? 

You do realize I'm not the one who is asking ChatGTP or...whatever. This isn't my thread. 

 

Keep arguing how..."negligible" Smoot-Hawley was though. 

[scourge165]

14 minutes ago, jross said:

art. intelligence 

Jensen Huang

[JimmySpeaks]

Scrooge in back peddle mode.  Bahahahahhahahhahaah

 

smoot this 

[scourge165]

20 hours ago, JimmySpeaks said:

Scrooge in back peddle mode.  Bahahahahhahahhahaah

 

smoot this 

Another Clever one Jimmy.

 

"Anyone who knows History." 

(Yeah, I know, you won't watch, but aside from mocking something I put on here that I shouldn't about my Mom going into Hospice, do you have an original thought? Anyway?).

 

[jross]

We are in the wait and see mode.  Where if you have funds, it is time to buy.  The timeline ends in late 2025/early 2026 based on Trumps push for a economic rush in 2026.

[scourge165]

11 minutes ago, jross said:

We are in the wait and see mode.  Where if you have funds, it is time to buy.  The timeline ends in late 2025/early 2026 based on Trumps push for a economic rush in 2026.

Yeah...I guess. I liked NVDA at 155, but I thought I was done buying(I don't think it got quite that high, probably ~153) but picked up 5000 shares at 87). Then some AVGO, TSM and BRK.B because again, that's effectively a safe growth fund at this point.

I'm a little nervous though...since I said this past weekend, a bounce on Monday and Tuesday could actually be bearish for them.

I don't think Trump has the timeline you do though. 

-He's facing an inherently difficult battle to keep either house being the incumbent
-The longer the market is in turmoil, the worse the hard numbers will get...and it's going to take a while to get those back up. 

So I'd say he has...maybe 90 days to reach deals(he's said he's not willing and willing in the same interview). And with the EU tariffs starting May1 and the Russian Tariffs starting and Trump threatening to double ours, it's going to be down to pull up if the economy/market is weaker early 2026 than it was when Biden left.