Smoot-Hawley Tariff Act

Definition

The Smoot-Hawley Tariff Act, enacted in 1930, was a protectionist trade law that raised tariffs on hundreds of imported goods to record levels. This act aimed to protect American industry during the Great Depression but ultimately exacerbated the economic downturn by stifling international trade and provoking retaliatory tariffs from other nations.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff Act was initially intended to protect American farmers and manufacturers from foreign competition during the economic hardships of the Great Depression.
2. The tariff rates set by the act increased duties on approximately 20,000 imported goods, significantly raising prices for consumers and businesses relying on foreign products.
3. In response to the Smoot-Hawley Tariff Act, many countries implemented their own tariffs on American goods, leading to a sharp decline in international trade.
4. Historians often cite the Smoot-Hawley Tariff Act as a factor that deepened the Great Depression by contributing to global economic isolationism.
5. The act faced significant opposition from economists and business leaders, but it was ultimately passed by Congress and signed into law by President Herbert Hoover.

Review Questions

• How did the Smoot-Hawley Tariff Act impact international trade during the Great Depression?
  • The Smoot-Hawley Tariff Act severely impacted international trade by raising tariffs on thousands of imports, which led to retaliatory measures from other countries. As nations imposed their own tariffs on American goods in response, global trade volumes plummeted. This escalation created an atmosphere of economic isolationism, further deepening the financial crisis and slowing recovery efforts for all involved economies.
• What were the primary motivations behind the enactment of the Smoot-Hawley Tariff Act, and how did those motivations reflect the economic conditions of the time?
  • The primary motivations behind the enactment of the Smoot-Hawley Tariff Act were to protect struggling American farmers and manufacturers who were facing fierce competition from imports amid the Great Depression. With unemployment soaring and businesses collapsing, lawmakers believed that increasing tariffs would provide relief and stimulate domestic production. However, these motivations reflected a short-sighted approach that neglected the interconnectedness of global economies during a time when cooperation was desperately needed for recovery.
• Evaluate the long-term economic implications of the Smoot-Hawley Tariff Act on U.S. trade policy and international relations.
  • The long-term economic implications of the Smoot-Hawley Tariff Act have been profound, leading to a reevaluation of U.S. trade policy in subsequent decades. The negative consequences of protectionism highlighted by this act contributed to a shift towards more liberal trade policies post-World War II, including commitments to reduce tariffs through agreements like GATT. Additionally, it shaped U.S. international relations by illustrating how trade barriers can lead to conflict and hinder cooperation, informing future policies that sought to foster global economic interdependence.

Related terms

Tariffs: Taxes imposed on imported goods designed to protect domestic industries by making foreign products more expensive.

Great Depression: A severe worldwide economic downturn that began in 1929 and lasted through the 1930s, characterized by high unemployment, deflation, and a significant drop in industrial output.

Protectionism: Economic policy of restraining trade between nations through tariffs, quotas, and other government regulations to protect domestic industries.