Smoot-Hawley Tariff Act

Definition

The Smoot-Hawley Tariff Act, enacted in 1930, was a piece of U.S. legislation that raised tariffs on numerous imported goods to historically high levels. The act aimed to protect American industries during the Great Depression but ended up triggering retaliatory tariffs from other countries, worsening the global economic situation and reducing international trade.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff Act was named after its sponsors, Senator Reed Smoot and Representative Willis Hawley, who believed it would safeguard American jobs and industries.
2. The act increased tariffs on over 20,000 imported goods, with some rates reaching as high as 60%, making it one of the highest tariff acts in U.S. history.
3. In response to the Smoot-Hawley Tariff, many countries imposed their own tariffs on American goods, leading to a significant decline in international trade.
4. The act is widely criticized by economists and historians for exacerbating the Great Depression and contributing to a worldwide economic downturn.
5. The failure of the Smoot-Hawley Tariff demonstrated the dangers of isolationist policies in an increasingly interconnected global economy.

Review Questions

• How did the Smoot-Hawley Tariff Act reflect the fiscal policies of the United States during the early 1930s?
  • The Smoot-Hawley Tariff Act reflected a protectionist fiscal policy aimed at shielding American industries from foreign competition amid the economic turmoil of the Great Depression. By significantly raising tariffs on imports, it sought to promote domestic production and employment. However, this approach backfired as retaliatory tariffs led to reduced international trade, demonstrating that protectionist measures can have adverse effects on a country's economy.
• What were the global consequences of the Smoot-Hawley Tariff Act in terms of economic interdependence among nations?
  • The global consequences of the Smoot-Hawley Tariff Act highlighted the fragility of economic interdependence among nations during a crisis. The act prompted retaliatory tariffs from other countries, resulting in a steep decline in global trade volumes. This situation exemplified how interconnected economies can suffer when one nation adopts isolationist policies, leading to a breakdown in international cooperation and worsening economic conditions worldwide.
• Evaluate how the legacy of the Smoot-Hawley Tariff Act has influenced modern trade policies and international relations.
  • The legacy of the Smoot-Hawley Tariff Act has had a lasting impact on modern trade policies and international relations by serving as a cautionary tale against excessive protectionism. Policymakers today often refer to its negative outcomes as they negotiate trade agreements aimed at promoting free trade and reducing tariffs. The act's historical context encourages contemporary leaders to consider the interconnectedness of global economies and the potential repercussions of unilateral trade measures that can disrupt international commerce.

Related terms

Tariff: A tax imposed by a government on imported goods, making them more expensive and thus encouraging consumers to buy domestically produced products.

Great Depression: A severe worldwide economic downturn that lasted from 1929 until the late 1930s, characterized by high unemployment, deflation, and a significant drop in consumer spending.

Protectionism: An economic policy that advocates for the restriction of imports through tariffs, quotas, and other measures to protect domestic industries from foreign competition.