100 Years Ago, Tariffs Killed South Bend's Wool Industry

The factories needed wool. American sheep were long dead. Tariff policy killed them both.

BY AARON HELMAN // POSTED DECEMBER 13, 2025

The year was 1926 and the 20s were roaring as loudly as they ever had, but during America's rise to preeminence, there were hints that things might not last this way forever. In South Bend, at least at a few factories, there was even some ominous writing on the wall. It's just that everyone was too busy watching the soaring stock markets to notice it.

It's not like the news was secret. It was right there on the front page of the South Bend Tribune on January 10, barely a week into the new year:

Local firm in receivership.

South Bend Woolen Mills Insolvent.

Archibald G. Graham Under Bond of $25,000 to Handle Business in Interest of Creditors.

It hadn't been that long ago that the South Bend Woolen Mills had been a big-time venture, but those days were over. In 1926, while everyone else was realizing wealth that had once seemed unimaginable, the Woolen Mills ran out of cash. As for how that happened, it's a story of business, protectionism, tariff policy...

...and an awful lot of dead sheep.

High tariffs were a hallmark of American economic policy throughout the 1800s. The nation didn't have a federal income tax and so it was tariffs — a tax levied against imported goods — that provided the funding that kept the government machine running. Rates fluctuated from administration to administration, but for the most part, they remained high on most goods most of the time.

That all changed in 1913. In February of that year, the nation ratified the 16th Amendment, allowing the Federal Government to collect income taxes. In October, Congress passed the Underwood-Simmons Act, which was the most significant tariff reduction in American history at that point. Rates dropped across the board, but most important to our story, the tariff rates on raw wool fell all the way to zero.

Whenever the government adjusts tariff rates, it creates winners and losers. In this case, the winners included the people who ran woolen mills and the consumers who bought woolen goods from those factories. The losers included the American sheepherders, and maybe most significantly…

…their sheep.

Once the American market was flooded with cheaper (and often higher quality) foreign wool, it was no longer economically viable to raise sheep for wool stateside. Jilted farmers were left with little choice but to slaughter their flocks and have them processed for meat. In the months that followed the passage of the Underwood-Simmons Act, hundreds of thousands of sheep lost their lives. For a brief period, the price of mutton dropped below the price of pork. And then, at a macroeconomic level, the markets adjusted, and the world moved on.

The South Bend Woolen Company wasn't the only game in town, and even before the reduction in tariffs, they were already being squeezed by their local competitors. The Stephenson Underwear Mills were located just down the street, and South Bend Woolen was left doing business in the shadow of their much bigger brother — literally and figuratively. Further upriver in Mishawaka, the Mishawaka Woolen Company outstripped them both.

The tariff reductions provided a lifeline for a South Bend Woolen Company already teetering on the brink. The outbreak of the Great War provided another one. Buoyed by low-cost materials and consistent war contracts, South Bend Woolen seemed to be saved, but of course, it wasn't to last. The war was over soon enough, and as it would turn out, the lower tariffs wouldn't last forever either.

The war ended in 1918 and America's brief flirtation with free trade ended shortly afterward. War-weary Americans were disillusioned with internationalism, and it's not hard to empathize with them. World War I was primarily a European conflict, but it had still cost the United States plenty of money and more than 100,000 lives. The 1918 midterm elections gave control of the congress to anti-entanglement Republicans, and the 1920 election of Republican President Warren G. Harding gave lawmakers the ability to turn back the clock a little bit, at least when it came to tariff policy.

They accomplished that reset with the passage of the Fordney-McCumber Tariff Act in 1922. Tariff rates soared across the board. Raw wool was taxed at a rate of $0.31 per pound, and for woolen factories across the United States, that was going to prove to be a significant problem, because remember, the entire American sheep stock had been slaughtered and eaten a decade earlier. Experts estimated that it would take 30-40 years of purposeful and deliberate breeding to restore the American sheep population to pre-1913 levels.

For the handful of American farmers with existing sheep stock, the tariffs were a boon. For everyone else connected to the industry, it was a disaster. The South Bend Woolen Mills faltered almost immediately, and nearly 300 people lost their jobs. Stephenson Underwear Mills shut down in 1935. Mishawaka Woolen lasted quite a bit longer, but they pivoted to rubber production and changed their name to Ball-Band.

A century later, as tariff policy returns into the national conversation, the story of South Bend Woolen Mills offers a lesson — though perhaps not the one either side of the debate is hoping to hear.

Those who favor high tariffs can point to 1913 and America's devastated sheepherders to support their protectionist ideas. Those who oppose tariffs can point right at the South Bend Woolen Mills and other businesses that were strangled by soaring costs. Both sides would be right.

Both sides would miss the point.

The real lesson is simpler if not more uncomfortable. Tariff policy always creates winners and losers, often in ways policymakers don't anticipate. Some of those consequences can last for years and decades. The sheep farmers who lost their livelihoods in 1913 and the mill workers who lost their jobs in 1926 were caught in the same trap — collateral damage from shortsighted policy whiplash, sacrificed to an economic theory that promised prosperity for a nation, but was only ever going to deliver it for some.

It will be the same way today.

There is no tariff policy that fixes everything for everyone. There never was.