The Price of Protection: Tariff Incidence and Import Collapse under the Infamous Smoot-Hawley Tariff

Kris James Mitchener and Mathieu Pedemonte
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Kris James Mitchener: Santa Clara University, CAGE, CESifo, CEPR & NBER
Mathieu Pedemonte: Inter-American Development Bank

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Using newly digitized monthly data on the quantities and prices of imports as well as product-level data on tariff rates, we estimate that in the first year after the passage of the Smoot-Hawley Tariff Act, imports facing rate increases fell swiftly and dramatically relative to imports not affected by tariffs: for a one-percentage-point increase in the tariff rate, they declined by an average of 4%. We also estimate that the incidence of Smoot-Hawley was almost entirely borne by U.S. importers. Using an open economy model, we attribute our high measured short-run trade elasticity of greater than 4 to fixed exchange rates that the U.S. maintained with most trade partners in the first 15 months after enactment. Our model also suggests that Smoot-Hawley ac counted for 27% of the decline in total US imports in the first year after enactment. Finally, we construct both partial equilibrium and general equilibrium welfare estimates of Smoot-Hawley. Both methods deliver welfare losses of about 0.2% of GDP, reflecting the high measured elasticity of substitution and low US import-GDP ratio.

Keywords: Trade policy; pass through; Smoot-Hawley Tariff; trade elasticity; international trade; tariff incidence; welfare analysis of tariffs JEL Classification: F10; F13; F14; F63; F68; N12; N72 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:805

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