Smoot-Hawley Tariff Act

Definition

The Smoot-Hawley Tariff Act was a U.S. law enacted in 1930 that raised tariffs on over 20,000 imported goods to historically high levels. This legislation aimed to protect American industries during the Great Depression, but it ultimately led to retaliatory tariffs from other countries and contributed to a decline in international trade.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff was initially intended to help American farmers and manufacturers by making foreign goods more expensive.
2. The act raised average tariff rates to about 60%, which was the highest level in U.S. history at that time.
3. Many countries retaliated against the Smoot-Hawley Tariff by imposing their own tariffs, leading to a significant decline in global trade.
4. Economists largely agree that the act worsened the Great Depression by reducing international commerce and harming relationships with trading partners.
5. Despite its intentions, the Smoot-Hawley Tariff is often cited as a classic example of protectionism gone wrong.

Review Questions

• How did the Smoot-Hawley Tariff Act reflect Herbert Hoover's approach to handling the economic crisis of the Great Depression?
  • The Smoot-Hawley Tariff Act reflected Herbert Hoover's belief in protecting American industries through government intervention. By raising tariffs, Hoover aimed to shield domestic businesses from foreign competition in hopes of reviving the economy. However, this strategy backfired as it led to international retaliation, further exacerbating the economic crisis rather than alleviating it.
• Evaluate the impact of the Smoot-Hawley Tariff on U.S. relations with other countries during the early 1930s.
  • The Smoot-Hawley Tariff significantly strained U.S. relations with trading partners as many countries retaliated with their own tariffs, leading to a trade war. This increase in protectionism diminished global economic cooperation and worsened economic conditions worldwide. The negative consequences of this act underscored the fragility of international trade relations during the Great Depression.
• Analyze how the legacy of the Smoot-Hawley Tariff Act influenced future U.S. trade policy and international relations.
  • The legacy of the Smoot-Hawley Tariff Act had a profound impact on future U.S. trade policy by highlighting the dangers of excessive protectionism. In response to its adverse effects on global trade, subsequent administrations moved towards more liberal trade policies, exemplified by legislation like the Reciprocal Trade Agreements Act of 1934. This shift aimed to foster international cooperation and economic interdependence, shaping a more interconnected global economy in the years following the Great Depression.

Related terms

Great Depression:

A severe worldwide economic downturn that began in 1929 and lasted throughout the 1930s, characterized by high unemployment, falling prices, and widespread poverty.

Tariff: A tax imposed by a government on imported goods, often used to protect domestic industries from foreign competition.

Reciprocal Trade Agreements Act: A 1934 U.S. law that allowed the president to negotiate bilateral trade agreements with other countries to reduce tariffs and promote international trade.