The Smoot-Hawley Tariff Act of 1930, formally known as the United States Tariff Act of 1930, sought to protect American farmers and other industries from foreign competition by raising import duties. This piece of legislation, sponsored by Senator Reed Owen Smoot and Representative Willis Chatman Hawley, is often cited for exacerbating the Great Depression’s woeful impacts in the United States and globally.
Key Takeaways
- The Act aimed at shielding U.S. farmers and key industries from international competition by boosting tariffs.
- It resulted in about a 20% increase in U.S. tariffs on imported goods.
- At least 25 countries responded by hiking tariffs on American products, inciting a sharp decline in global trade.
- The Act contributed notably to the Great Depression’s severity, though not a primary cause.
- Over 1,000 economists had urged President Herbert Hoover to veto the Act, emphasizing its anticipated pitfalls.
- Under President Franklin D. Roosevelt, efforts shifted towards reducing tariffs with the Reciprocal Trade Agreements Act of 1934.
The Genesis of the Smoot-Hawley Tariff Act
Enacted in June 1930, the Smoot-Hawley Tariff Act added approximately 20% to the USA’s already elevated import duties on foreign agricultural and manufactured goods. The previous Fordney-McCumber Act of 1922 had raised the average tariff on incoming goods to about 40%. Inspired initially to assist struggling U.S. farmers competing against European agricultural imports, the Smoot-Hawley Act extended to multiple American industries following heavy lobbying efforts.
Consequences of the 1929 Stock Market Crash
Initially stumbling in early 1929 due to moderation in the Senate, the Smoot-Hawley bill’s passage was lubricated by the stock market crash that year, bolstering protectionist sentiments. Coming through narrowly in the Senate (44 to 42) but easier in the House (222 to 153), President Hoover signed it into law unfazed by substantial opposition, including petitions from a thousand plus economists. Hoover mentioned employable flexibility within the Act to modify tariffs up to 50% based on grievances, although many considered it optimistic at best.
Immediate and Global Backlash
Ripple effects from the Smoot-Hawley Act emerged almost immediately. The higher tariffs compounded the distress of already economically battered countries, including Germany, which struggled hugely with World War I reparations. In trading tit-for-tat blow, 25 countries augmented their tariffs against the U.S., shrinking international trade by about 66% between 1929 and 1934. Both U.S. exports and imports plummeted, with economists widely understanding this impact.
A Shift in Policy: The Reciprocal Trade Agreements Act
Post-1932, with Presidents changed too (Franklin D. Roosevelt defeated President Hoover), policymakers like Roosevelt proactively moved towards lowering U.S. trade barriers. Responsibilities for tariff policies relocated to presidential negotiators under the 1934 Reciprocal Trade Agreements Act. Such strategic changes heralded broader intergovernmental efforts for promoting international trade, with the United States heavily involved in enacting treaties like GATT, NAFTA, and progressively supporting the World Trade Organization (WTO).
Economists still argue about Smoot-Hawley’s dictation over the Depression, but consensus curves towards Smoot-Hawley being a hindrance rather than helper despite America’s minimal direct trade context back then. Renown institutions and historians corner this legislation within America’s ‘most catastrophic congressional actions.’
Frequently Asked Questions
What Was the Purpose of the Smoot-Hawley Tariff of 1930?
The intent behind the Smoot-Hawley Tariff Act of 1930 was to guard U.S. farmers from foreign competitors by raising tariff barriers and extending protections to other critical industries.
Did the Smoot-Hawley Tariff Act Cause the Great Depression?
The Act did not directly cause the Great Depression but significantly deepened the crisis. It magnified fiscal torments among debt holding nations and incited retaliatory tariffs, sharply tightening international trade which was critical for many economies.
What Did Investors Fear as a Result of the Smoot-Hawley Tariff Act?
Investors primarily feared drastic price falls hailing from the Smoot-Hawley Tariff Act. Those anxieties quickly turned into widescale sale-offs, further placeboing fears.
How Did European Countries React to the Smoot-Hawley Tariff Act?
Opposition by European nations catalyzed proportional retaliations; many upped their own duties targeting U.S. exports, compounding trade hardships and worsening international economic depression considerably more across the Atlantic.
Related Terms: Great Depression, Trade War, Reciprocal Trade Agreements Act, Protectionism, Tariffs.
References
- Senate.gov. “The U.S. Senate: The Senate Passes the Smoot-Hawley Tariff”.
- UVA/Miller Center. “Presidential Speeches/Herbert Hoover Presidency: June 16, 1930: Message Regarding the Smoot-Hawley Tariff Act”.
- Britannica.com. “Smoot-Hawley Tariff Act”.
- The Street. “Great Depression: Causes, Effects and Timeline”.
