- President Donald Trump ran through a brief history of American tariff policy during the early 20th century at a press conference announcing the updated North American Free Trade Agreement (NAFTA).
- Trump appeared to give a positive review to the Smoot-Hawley tariffs of the 1930s.
- Most economists agree that the Smoot-Hawley tariffs worsened the Great Depression and were a massive mistake.
During a press conference meant to announce a new US-Canada-Mexico trade deal, President Donald Trump zipped through his perception of the history of US tariffs in the early 20th century. As part of the rundown, the president appeared to endorse a policy that most economists credit for worsening the Great Depression.
During an aside on his administration’s steel and aluminium tariffs, Trump ran through the changes in tariff policy in the early 1900s.
“Tariffs ended in 1913. They then went to a different system in 1918, totally unrelated,” Trump said. “In 1928, you had the Great Depression. For a lot of differently reasons. Not necessarily our country’s fault, but a little bit our country’s fault. Then in the 1930s, they said we better start charging tariffs. We need money to come into our country again.”
Trump’s assertion that tariffs “ended in 1913” is not correct:
- The US did ratify the 16th Amendment that year, which created the federal income tax and began to shift the government away from tariff revenue as the main source of revenue.
- The government also passed the Underwood Tariff Act that year, which significantly cut tariff rates.
But the larger issue with Trump’s historical musing came from the president’s commentary around the Depression and the tariffs that brought money into the country.
Following the historic stock market crash and subsequent economic collapse of 1929, Congress passed the Smoot-Hawley tariffs in 1930. The law represented a major increase in the tariff rate for many goods and was designed to help pull the US out of the Great Depression by encouraging US manufacturing.
But contrary to Trump’s insinuation that the tariffs helped alleviate the economic pain from the Depression, most economists now see the Smoot-Hawley tariffs as a disaster that triggered a worldwide increase of protectionism and likely worsened the Depression.
Trump has defended the recent tariffs on steel, aluminium – and, more broadly, tariffs on Chinese goods – as necessary to protect US industries and bring money back into the US. Most economists estimate that the tariffs will end up costing the US jobs and hurting American businesses.
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