Smoot-Hawley Tariff Act

Definition

The Smoot-Hawley Tariff Act, enacted in 1930, was a U.S. law that raised tariffs on hundreds of imported goods to protect American industries during the Great Depression. It aimed to encourage domestic production by making foreign goods more expensive, but it led to retaliatory tariffs from other countries, contributing to a decline in global trade and worsening the economic crisis.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff Act raised U.S. tariffs to the highest levels in history, averaging about 60% on imports.
2. The act was initially intended to protect American farmers and manufacturers from foreign competition during the economic downturn.
3. In response to the Smoot-Hawley Tariff, many countries retaliated by imposing their own tariffs, leading to a significant drop in international trade.
4. The act is widely blamed for exacerbating the Great Depression by disrupting global commerce and increasing tensions between nations.
5. Economic historians argue that the Smoot-Hawley Tariff played a role in deepening the economic malaise not just in the United States but across the globe.

Review Questions

• How did the Smoot-Hawley Tariff Act reflect the economic conditions of its time and what were its intended goals?
  • The Smoot-Hawley Tariff Act was a response to the dire economic conditions of the Great Depression, reflecting a desire to protect struggling American industries and jobs. By raising tariffs on imported goods, it aimed to encourage consumers to buy domestic products instead. However, this approach ultimately backfired as it isolated the U.S. from international markets and worsened the global economic situation.
• Evaluate the consequences of the Smoot-Hawley Tariff Act on international relations and trade dynamics in the 1930s.
  • The Smoot-Hawley Tariff Act had significant negative consequences for international relations, as countries around the world responded with their own tariffs. This led to a cycle of retaliation that diminished global trade and strained diplomatic ties. The act contributed to rising protectionist sentiments, creating an environment of economic nationalism that undermined cooperation among nations during a critical period of economic turmoil.
• Analyze how the legacy of the Smoot-Hawley Tariff Act continues to influence contemporary trade policies and debates.
  • The legacy of the Smoot-Hawley Tariff Act is evident in today's trade policy discussions, where protectionism versus free trade remains a contentious issue. Policymakers often reference this historical example to caution against high tariffs that can lead to retaliation and global trade wars. The act serves as a reminder of the interconnectedness of economies and the potential pitfalls of isolating a country from international markets in times of economic distress.

Related terms

Great Depression:

A severe worldwide economic downturn that lasted from 1929 to the late 1930s, marked by high unemployment, declining industrial output, and widespread poverty.

Protectionism:

An economic policy aimed at shielding domestic industries from foreign competition through tariffs and trade barriers.

Reciprocal Trade Agreements: Trade agreements between countries that mutually lower tariffs and other trade barriers to promote international trade.