Imagine waking up in 1932, in any US city. Upon ordering your morning coffee, you realise that its price has doubled since last year. This isn’t because of a coffee shortage, but rather because new trade barriers have caused the price of importing Colombian coffee beans to shoot up. The same thing has happened to sugar, tea and cocoa. Everyday items have suddenly become a luxury.
This dramatic change stemmed from one of the most harmful decisions in modern economic history: the Smoot-Hawley Act, enacted in June 1930. This law, championed by senator Reed Smoot and congressman Willis C. Hawley, aimed to safeguard US agricultural interests in the wake of the 1929 stock market crash.
However, pressure from industry lobbies meant it quickly expanded to cover over 20,000 products, including manufactured goods. Tariffs averaged around 40%, but in some cases were as high as 100%.
