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

Published online by Cambridge University Press:  03 March 2009

Judith A. McDonald ,
Anthony Patrick O'Brien  and
Colleen M. Callahan
Judith A. McDonald
Affiliation:
Associate Professors of Economics at Lehigh University, 621 Taylor Street, Bethlehem, PA 18015-3117.
Anthony Patrick O'Brien
Affiliation:
Associate Professors of Economics at Lehigh University, 621 Taylor Street, Bethlehem, PA 18015-3117.
Colleen M. Callahan
Affiliation:
Associate Professors of Economics at Lehigh University, 621 Taylor Street, Bethlehem, PA 18015-3117.
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Extract

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.

Type
Articles
Information
The Journal of Economic History , Volume 57 , Issue 4 , December 1997 , pp. 802 - 826
Copyright
Copyright © The Economic History Association 1997

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