Trade Wars: Canada's Reaction to the Smoot-Hawley Tariff

Judith A. McDonald, Anthony Patrick O'Brien and Colleen M. Callahan

The Journal of Economic History, 1997, vol. 57, issue 4, 802-826

Abstract: Strange as it seems, the infamous Smoot-Hawley Tariff might have had an expansionary effect on the U.S. economy. Basic macroeconomic principles indicate that the direct effect of a tariff increase is expansionary. This expansionary effect might be offset by retaliatory increases in foreign tariffs. Barry Eichengreen has recently questioned whether significant retaliation to Smoot-Hawley occurred. This article demonstrates that the tariff increases enacted during 1930 in Canada—the largest trading partner of the United States—were in direct response to Smoot-Hawley. The conventional wisdom that Smoot-Hawley hurt the U.S. economy may be right after all.

Date: 1997
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