Cordell Hull and Liberalized Trade

On June 13, 1930, nearly a year into the Great Depression, Republican President Herbert Hoover signed the Smoot-Hawley Tariff Act into law, capping the most protectionist era in American commercial history until the coming of Donald Trump. He did so over the objections of 34 U.S. trading partners and the sharp criticisms of more than 1,000 professional economists.

Hoover justified his action on the grounds that no measure was more vital to America’s economic health than a protective tariff. One of his supporters in Congress, Sen. James Watson (R-Ind.), touted Smoot-Hawley as a magic elixir for the Depression itself, proclaiming that with its passage, the nation would instantly be on the upswing. Within a year, he added confidentially, the U.S. economy would have “regained the peak of prosperity.”

The law’s authors, Sen. Reed Smoot (R-Utah) and Rep. Willis C. Hawley (R-Ore.), envisioned a high-tariff country that would be self-contained, self-sufficient and self-sustaining, freed of what they and their business allies considered the evils of foreign competition.  On this, President Hoover was in full agreement; it was overseas, he thought, where the contagion of the Depression began and, through unfair trade practices, spread to contaminate a pristine America.  The answer was to build a virtual economic moat to keep out the wider world.

A high tariff would not only protect America from outside influences, it would also protect the right people at home.  Marriner Eccles, Federal Reserve chairman under FDR, knew Reed Smoot, a fellow Utah Mormon, and understood his right-wing protectionist ideology.  It was, Eccles wrote in his memoirs (“Beckoning Frontiers,” 1951), an updated version of 19th century Whiggery, which held that the federal government had a responsibility to provide boundless assistance to creditors and investors (and especially manufacturers) but no responsibility whatever to maintain “a state of equilibrium” between creditors and debtors, or between producers and consumers.

The Smoot-Hawley Tariff was a perfect expression of the perverse Whig-Republican trade philosophy. It doubled the average ad valorem tariff on individual imports to 53%, highest ever, except for the 19th-century Dingley Tariff; it also recorded the highest “effective” rate (tariffs collected as a percentage of dutiable imports) in American history, bar none.

Under Smoot-Hawley, tariff schedules went up on 925 manufactured items and 75 agricultural products, the latter increasing by two-thirds.  Over 20 foreign countries responded with retaliatory increases of their own. By 1932, U.S. imports had fallen from $4.4 billion to $1.3 billion, while U.S. exports had declined from $5.2 billion to $1.6 billion. With that assist, the Depression went into overdrive.

Unsurprisingly, GOP protectionists paid dearly at the polls. Hoover, Smoot and Hawley all lost their seats in the 1932 election. The system they designed to economically isolate America didn’t bring the predicted prosperity; in fact, it became the very symbol of bad trade policy for generations to come — until Donald Trump’s blundering Liberation Day tariffs surpassed it in notoriety.

Yet, during the interval between Smoot-Hawley and Trump, the U.S. experienced something of a commercial golden age brought about by low-tariff liberals, the anti-protectionist New Dealers and their successors, who installed a trading system that was the polar opposite of conservative protectionism based on nationalist xenophobia.

The man more responsible than any other for the altered direction was FDR’s Secretary of State Cordell Hull, former Tennessee congressman and senator, and a career-long internationalist and free trader. A populist Democrat, Hull was convinced protective tariffs taxed consumers to subsidize manufacturers, thereby promoting monopoly; they also imperiled world peace, he believed, by breeding hostility between nations. His contribution to ending predatory protectionism was persuading Roosevelt, who needed little convincing, to endorse the Reciprocal Trade Agreements Act of 1934 over the objections of both Republicans and corporate Democrats.

The form Hull’s efforts took, the Trade Agreements Act he mainly authored, was an amendment to Smoot-Hawley that empowered the president to negotiate three-year, renewable trade pacts with other countries without congressional action or approval, lowering existing tariff rates by up to 50% in exchange for similar concessions from potential trading partners. The stratagem by-passed the need for a new trade law potentially influenced by vested interests; the New Deal Congress endorsed it overwhelmingly, thereby fulfilling a plank Hull himself had inserted into the 1932 Democratic platform.

Within a year of passage, the Trade Agreements Act had 12 foreign signatories; within three years, 25 had signed on, with heavy representation from Latin America. The enthusiastic Hemispheric participation made Hull’s trade program the key aspect of FDR’s celebrated “good neighbor” policy. Altogether, by the end of the 1930’s, the lower commercial barriers brought about by liberalized trade had reduced Smoot-Hawley import duties by 29% and increased American exports by 40%. Over the ensuing years, average U.S. tariffs fell to barely 10%, a fraction of original Smoot-Hawley levels.

The Trade Agreements Act, renewed multiple times, became the basis for the postwar trading regime formulated at Bretton Woods, N.H., in 1944 by the soon-to-be-victorious Allies. That framework introduced the General Agreement on Tariffs and Trade (GATT) three years later, which expanded Hull’s prewar system and made it multilateral and truly international.

Operationally, GATT consisted of a series of trading rounds (discussions) that by 1970 had dismantled tariffs and quotas most everywhere and virtually established global free trade, Cordell Hull’s ideal. Over the half-century following World War II, average tariffs worldwide fell from 40% to 5%, while membership in the GATT — it became the World Trade Organization (WTO) in 1995 — soared to 137 countries. Simultaneously, the financial value of international trade multiplied 20-fold, from $275 billion to $5.5 trillion, between 1970 and 2000 alone.

This was the system Donald Trump set out in 2025 to destroy on the nonsensical grounds other countries were “ripping us off.” Ironically, he was assisted in this objective by the trading system itself, which, while creating unprecedented wealth, was allowed to be taken over and dominated by unregulated multinational corporations (over a third of them based in the U.S.), whose number grew exponentially after circa 1980 and whose signature features became so-called foreign direct investment (FDI) and the offshoring of domestic blue-collar work.  (See: Medard Gabel and Henry Bruner, “Global Inc,” 2003.)

It was this corporate outsourcing of production and employment, not free trade as such, that gave rise to the working-class disaffection key to paving the way for Donald Trump’s ongoing disruption of the world economy.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.