a cold wind cuts through the ragged tents of Hooverville a mother huddles over a makeshift stove stirring a pot of watery soup she remembers the radio's advice stretch the food make do she tries her best but she knows it won't be enough not for her children not for her husband standing miles away in a breadline his once proud suit now caked in dust this was America in the Great Depression a nation brought to its knees and all this devastation was caused by something you weren't expecting tariffs or was it did tariffs really trigger the worst economic disaster in modern history and could they do it again we're breaking it all down on today's episode of the Infographic Show did tariffs really caused the Great Depression you've probably heard of the Great Depression everyone has stock market crash bank failures millions unemployed by 1933 one in four Americans was jobless and it wasn't just factory workers or farmers even doctors lawyers and upper middle class professionals saw their incomes plummet by up to 40% families who once lived comfortably suddenly found themselves struggling to survive their savings were wiped out their futures uncertain it was a time when make do or do without wasn't just a saying it was a survival strategy family stretched every meal patched and repaired old clothes and walked miles instead of driving because with unemployment at record highs owning and fueling a car was a luxury few could afford the financial strain tore at the very fabric of families and communities divorce rates dropped but abandonment skyrocketed men ashamed and frustrated by their inability to provide for their families often disappeared without a trace leaving their wives and children to fend for themselves to understand how things got so bad and what role tariffs played we have to go back way back and not just to 1929 when the Great Depression began no we're talking about the depression that started it all the one history barely remembers the forgotten depression the forgotten depression lasted just 18 months from January 20th to July 1921 but it was brutal the US stock market tanked by 47% and corporate profits plummeted by over 90% unemployment hit nearly 12% it was just 1.4% during World War I in the aftermath of this war the US faced a tricky transition factories shut down 1.6 million soldiers returned home to flood the workforce and inflation soared in response the government slashed spending by a staggering 75% and hiked interest rates to a steep 7% the result was a 32 1.5% collapse in industrial production the worst in history at the time prices plunged over 15% and businesses failed on mass leaving millions struggling to survive the real turnaround came when President Woodrow Wilson cut federal spending by 65% from 18.5 billion to 6 billion this austerity helped stabilize the economy and eventually fueled the roaring 20s by March 1921 Warren Harding had taken over and his presidency was marked by important change the return to higher tariffs in the US the US has had a turbulent relationship with tariffs one moment it's championing free trade and the next it's slapping high tariffs to protect domestic industries it's an economic roller coaster swinging between protectionism and open markets depending on the political and economic climate protectionism refers to government policies that restrict international trade think of it as putting up a fence around your country's economy to shield local businesses from foreign competition that idea is simple limit imports and domestic industries have a better chance to thrive imports can be restricted in several ways tariffs are arguably the most common among them tariffs are essentially taxes on imported goods that make foreign products pricier encouraging people to buy local instead america's early days were heavily marked by protectionism however in the late 19th and early 20th centuries the US was riding high on relatively free trade with an understanding that international commerce made large-scale wars too costly the Underwood Simmons tariff of 1913 was the one to break the tradition of protectionism by lowering tariffs and introducing an income tax this was a bold step toward free trade but it didn't last long world War I put nations including the US straight back into a protective mindset by the time the US emerged from the war the political landscape had changed european economies were recovering and US industries were facing new competition american farmers who had been selling crops to Europe during the war were now losing those markets as European agriculture bounced back to protect American industries and farmers from competition the Emergency Tariff Act of 1921 was passed but that was just the beginning the real gamecher came in 1922 during Harding's presidency it was the fordney mccumber tariff act which raised tariffs above levels seen in 1913 this law wasn't just about higher rates it also gave the president the power to adjust tariffs by as much as 50% to balance domestic and foreign production costs the goal was simple protect US industries from foreign competition but there was a catch the fordney mccumber tariff had an unintended consequence it crippled European exports to the US with fewer American dollars flowing in war torn nations struggled to pay off their debts deepening economic tensions instead of helping the global economy recover after World War I the tariff made things even worse creating friction between the US and its allies and slowing down Europe's post-war rebuilding efforts meanwhile in the US tariffs kept creeping up through the 1920s these increases had a major impact on global trade creating a skewed relationship between the US and its trading partners by the early 1930s the world had fully embraced protectionism and the US had set the stage for the trade battles that would shape the global economy for years to come this brings us to the very beginning of the Great Depression a moment when the world seemed to spiral into chaos the 1920s had been a decade of wild growth in the US these roaring 20s were like a fever dream everything was booming new cars radios household appliances americans were buying it all and they weren't just buying goods they were pouring money into stocks people were in a frenzy jumping into the market with both feet hoping to get rich quick and fielding a market boom that seemed unstoppable until it wasn't stock prices skyrocketed the Dow Jones Industrial Average the stock market's key index soared nearly 162% in just 5 years but as anyone who's been on a roller coaster knows what goes up must come down and this ride was about to crash hard and the ride would start going down in October 1929 that's when the unthinkable happened the stock market crashed it all started on October 24th Black Thursday the market began its freefall and the panic spread like wildfire a brief rally followed but that was a false hope by Black Monday and Black Tuesday the damage was irreversible the Dow plummeted losing nearly 90% of its value over the next few years the American dream turned into a nightmare for so many people but the crash wasn't the end it was just the beginning once the market collapsed everything else followed the economy froze banks failed businesses went bankrupt people lost their jobs consumers seeing their wealth vanish simply stopped buying factories and stores shut down the whole country ground to a halt and let's not forget the farmers they'd already been struggling with overprouction after World War I crop prices were falling and they had debts they couldn't pay it was a perfect storm and it was only getting worse then came the fateful decision from the US government president Herbert Hoover who had already enacted several major policies decided to sign the Smoot Holly Tariff Act into law in 1930 the Smoot Holly Tariff Act was often called one of the most catastrophic acts in congressional history and that is not just political rhetoric that is straight from the official US Senate website when even Congress admits that they messed up you know it was bad but how did the Smoot Holy Tariff Act earn such an unflattering reputation well it didn't happen by accident this was a slow motion train wreck years in the making it was the culmination of years of escalating protectionism political maneuvering and let's be honest a whole lot of economic short-sightedness we've already talked about tariffs being a favorite tool of policymakers looking to shield domestic industries from foreign competition but compared to what was coming those earlier increases were just a warm-up act when the Great Depression came everyone in Washington was panicking desperate for a fix lawmakers turned to an old familiar trick tariffs that's how the Smoot Holly Tariff Act came to be the bill was originally meant to help struggling farmers by raising duties on agricultural imports but as with most things in politics it didn't stay simple lobbyists for various industries saw an opportunity and jumped in tacking on protectionist measures for all sorts of products by the time the bill was finalized it wasn't just about farming anymore it was a full-scale tariff hike on over 20,000 foreign goods it's no surprise that roughly 1,000 economists literally begged President Hoover not to sign it but despite his own reservations Hoover went ahead anyway officially signing the Smooth Holly Tariff Act into law on the 17th of June 1930 but other countries weren't just going to sit back and take it and that's the thing about tariffs they often come with unintended consequences and so Smoot Holly ignited what economist Chris James Mitcher called the mother of all trade wars nine countries Argentina Australia Canada Cuba France Italy Mexico Spain and Switzerland retaliated almost immediately with tariffs directly targeting US goods canada's response was particularly filled after all the country was America's biggest trading partner at the time in 1929 18% of all US exports went to Canada and 11% of US imports came from the country that economic relationship was obliterated almost overnight initially the Canadian prime minister at the time William Lion McKenzie King slapped tariffs on just 16 American products but when RB Bennett took over in 1930 he cranked up the pressure canada raised tariffs even further on US goods while simultaneously cutting tariffs on roughly 270 products from the United Kingdom and its dominions by 1932 Canada hosted a massive trade summit with the other British territories laying the groundwork for a trade block that actively excluded the US essentially America's protectionism pushed Canada right into Britain's arms canadian exports to the UK surged especially in agriculture the very industry Smooth Holly was meant to protect in the US but this was just the start a total of 25 countries would eventually strike back with tariffs of their own countries already struggling from the Great Depression suddenly faced even higher barriers to selling goods to the US making an already bad situation worse us exports to retaliating nations fell by 28 to 32% even countries that didn't retaliate still cut US exports by 15 to 23% global trade collapsed dropping by 66% between 1929 and 1934 one country hit particularly hard was Germany already drowning in debt from World War I reparations Germany relied on exports to earn the money needed to pay its bills smooth Holly cut off one of its key revenue streams worsening its economic crisis nobel Prizewinning economist Paul Samson described it best cynics were delighted at the spectacle of a country trying to collect debts from abroad and at the same time shutting out their import goods that could alone have provided the payment for those debts in other words America wanted its money but refused to buy anything in return germany's financial collapse didn't just deepen its suffering it paved the way for Adolf Hitler's rise to power with the economy in ruins and desperation at an all-time high extremist voices suddenly didn't sound so extreme as businesses crumbled and unemployment soared Hitler's promise of economic revival and national strength became terrifyingly appealing less than 3 years after Smooth Holly was signed Hitler was the chancellor of Germany but the backlash against Smooth Holly wasn't just economic it was also political 35 governments lodged formal protests against it and nations even formed new trade alliances to deliberately exclude the US this fit right into the broader trend of American isolationism in the 1930s but this kind of economic nationalism wasn't new the phrase America first was already commonly used at the time to describe protectionist policies despite President Woodrow Wilson winning the Nobel Peace Prize in 1919 for creating the League of Nations a forerunner of the United Nations the US never even joined it smoot Holly only reinforced this isolationist stance making America seem less cooperative and more self-serving but all this doesn't answer the main question did tariffs really cause the Great Depression it's easy to assume that the Smooth Holly Tariff Act of 1930 only made the Great Depression worse especially since the crisis officially began in 1929 but the reality is more complicated which is why the true impact of tariffs on the Great Depression remains a topic of debate even today economists hold different views of the matter some argue that Smoot Holly was the spark that ignited the Great Depression turning a recession into a global catastrophe but what about the timeline if the stock market had already crashed was the tariff really to blame or was it just pouring gasoline on an already burning fire well before the tariff was signed in law in June 1930 the economy was struggling there's no doubt about it however there was still hope for a recovery but then Smood Holly slammed the brakes on global trade cutting off US businesses from foreign markets just when they needed them the most the ensuing trade war slashed US exports from 5.2 from $2 billion to just 1.7 billion a massive 67% drop and the hardest hit sector was agriculture the sector Smoot Holly was trying to protect before all the lobbyists got involved crops like wheat cotton and tobacco which relied on international demand were hammered pushing farmers into bankruptcy and causing small banks especially in rural areas to collapse but that's not even the most shocking claim about tariffs causing the Great Depression one economist Jude Waneski claimed that the stock market crash of 1929 was actually triggered by tariffs well the anticipation of tariffs that is according to Waniski the market started anticipating the act as early as December 1928 that's almost 8 months before Hoover even signed the bill into law it's as if Wall Street could sense the impending protectionist storm and it panicked this view suggests that the mere fear of looming tariffs was enough to spook investors this triggered a chain reaction that ultimately led to the stock market collapse and the official start of the Great Depression but let's turn the lens to the other side some economists argue that the depression was already underway by the time the Smoot Holly tariff act took effect this would mean that the tariffs didn't cause it by 1930 when the bill was passed unemployment was already climbing the stock market had already shown signs of instability and the economy was already heading south the proponents of the theory point to the fact that the exports only accounted for about 7% of the US GDP in 1929 so how big of an impact could the tariffs really have had remember the US had raised tariffs in 1922 too and it didn't trigger the Great Depression then in fact some argue that the depression caused the decline in trade not the other way around many experts agree that Smoot Holly didn't directly cause the depression it just made an already bad situation worse you can think of it like this the depression was already a storm cloud hanging over the economy smooth Holly was the lightning strike that turned it into a full-blown thunderstorm so it didn't create the storm but it definitely made it worse it caused the whole vicious cycle of retaliation where one country raised tariffs and others strike back as a result trade shrinks and the recession deepens smooth holly was a disaster it's as simple as that even if it didn't single-handedly trigger the Great Depression it definitely made things worse the sharp decline in global trade the collapse of agricultural exports and the retaliation from other countries all point to one undeniable fact protectionism simply doesn't work it's like trying to save a sinking boat by patching one hole while drilling another so whether the tariffs were the final straw the main cause or just a bad idea that added fuel to the fire one thing is for sure Smoot Holly should have never happened president Franklin Roosevelt realized this almost immediately that's why he set about fixing the damage working to undo Smoot Holly's catastrophic effects as soon as he took office in 1933 and his response to the tariff disaster was bold and swift the New Deal Roosevelt's game-changing blueprint for America's recovery wasn't just about saving the banks and putting people back to work it was about shaking things up and tackling the issues that the Smooth Holly tariffs had messed up in the first place and one of Roosevelt's biggest moves was cutting down those sky-high tariffs that had caused an international economic food fight remember the Smoot Holly tariffs strangled global trade and dragged the economy even deeper into the mess so Roosevelt's plan was to do the exact opposite one of his boldest moves during these efforts was the Reciprocal Trade Agreements Act of 1934 this wasn't just a tweak to the system it was like hitting the undo button on the disastrous protectionist policies that had been put in place roosevelt had the authority to negotiate directly with foreign governments cutting tariffs on both sides of the Atlantic his goal was to break the cycle of retaliation and get trade flowing again after all a world that is trading is a world that is thriving roosevelt's act set the stage for the US to pivot from isolationist policies to becoming the global champion of free trade so in the years that followed the US took the lead in establishing major international trade agreements including the general agreement on tariffs and trade or GAT which later evolved into the World Trade Organization or WTO by tearing down tariffs and opening the doors for international cooperation President Roosevelt showed that protectionism wasn't the way out it was the way to stay stuck in a never-ending economic slump but while Roosevelt's efforts were crucial the real end to the Great Depression came with an unexpected twist world War II when the US entered the war in 1941 something dramatic happened unemployment plummeted from a staggering 8 million in 1940 to just over 1 million by 1943 but in reality more than 16 million Americans were conscripted into the armed forces so real private sector unemployment actually stayed a lot higher than those numbers suggest after World War II international trade channels opened up and reversed those crushing price and wage controls suddenly there was a massive demand for cheap goods the government as a huge buyer gave the economy the muchneeded fiscal stimulus it had been missing this jumpstarted industries created jobs and paved the way for private investment to surge in fact private investment shot up from $10.6 billion in 1940 to $30.6 billion just one year after the war wrapped up by the end of the war the economy wasn't just back on track it was booming the stock market went on a bull run and things started looking up for the American public and that's what ended the Great Depression the economic shift triggered by wartime demand investment and global trading channels however just because the US managed to come out of the Great Depression doesn't mean the road was a smooth one quite the contrary it was rocky treacherous and full of lessons that frankly we would rather not repeat the damage done by the Smooth Holly Tariff Act was catastrophic and the scars from that period are still a part of economic history so let's be clear no one and we mean no one would want to go down that road again right well it turns out history isn't as far behind us as we might have hoped just when we thought that we learned the painful lessons of the past tariffs are making a dramatic comeback the US administration's rhetoric about tariffs today even has a certain nostalgia to it the latest approach to tariffs isn't just about protecting US industries from foreign competition it's about using tariffs like a weapon of power aiming them at Canada Mexico China and even Europe all while claiming that these measures will improve the US standing on the world stage tariffs are being used to force political concessions like immigration control or geopolitical leverage but history has shown that tariffs are a risky game and that is putting it mildly especially today unlike the preWorld War II era the global economy today is far more interconnected complex supply chains particularly between the US Canada and Mexico mean that even small disruptions can cause major ripple effects and that is where things get complicated this isn't just about damaging one sector or one country it's about jeopardizing entire economic ecosystems when one domino falls the ripple effects can be felt worldwide america's tariffs especially the ones imposed on China could lead to real economic downturn experts warned that these moves could raise household costs shrink US economic output and even trigger a broader trade war that could make the global recession of the 1930s look like a mild inconvenience and while it's too soon to say whether these tariffs will push us into a great depression 2.0 the potential for a repeat of history is undeniably there especially if retaliation from other countries turns into a full-blown tit for tat the America first approach might seem appealing in the short term but if even a sliver of the chaos from the 1930s comes back we could be facing a far grimmer reality we can only hope that we've learned from those past mistakes do you think the Smooth Holly tariff helped trigger the Great Depression or was it just one piece of a much bigger puzzle could we be headed for a great depression 2.0 or do you think other factors would have to line up before we reach that level of crisis let us know your thoughts in the comments now go check out what if the US imposed 100% tariffs or click on this video instead