Smoot-Hawley Tariff Act

Definition

The Smoot-Hawley Tariff Act, enacted in 1930, was a significant piece of legislation that raised duties on numerous imported goods to protect American industries during the Great Depression. By imposing high tariffs, the act aimed to stimulate domestic production but ended up exacerbating the economic downturn by provoking retaliatory measures from other countries, further decreasing international trade.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff Act raised tariffs on over 20,000 imported goods, leading to some of the highest tariff rates in U.S. history.
2. Many countries retaliated against the U.S. by imposing their own tariffs, which contributed to a significant decline in international trade.
3. The act was initially supported by various agricultural and industrial groups who believed it would help stabilize prices and protect American jobs.
4. Economists now largely agree that the Smoot-Hawley Tariff Act worsened the Great Depression by stifling trade and contributing to global economic instability.
5. The act's consequences led to a reevaluation of trade policies in the U.S., eventually resulting in a shift towards more open trade agreements in subsequent decades.

Review Questions

• How did the Smoot-Hawley Tariff Act attempt to address economic challenges during the Great Depression, and what were its intended outcomes?
  • The Smoot-Hawley Tariff Act aimed to counter the economic challenges of the Great Depression by protecting American industries through high tariffs on imports. The intended outcomes were to stimulate domestic production and preserve American jobs by making foreign goods more expensive. However, while it was designed to boost the economy, it instead led to retaliatory tariffs from other nations, ultimately harming U.S. exports and worsening the economic crisis.
• What were some of the key criticisms of the Smoot-Hawley Tariff Act from economists and politicians at the time?
  • Critics of the Smoot-Hawley Tariff Act argued that it would lead to trade wars, reducing international trade and exacerbating the Great Depression. Economists warned that high tariffs would raise prices for consumers and hurt U.S. exporters by limiting their markets abroad. Additionally, many politicians believed it was an ineffective solution to the economic problems facing the country and foresaw potential retaliation from other nations that could further harm global economic relations.
• Evaluate the long-term effects of the Smoot-Hawley Tariff Act on U.S. trade policy and global economic relations in subsequent decades.
  • The long-term effects of the Smoot-Hawley Tariff Act fundamentally altered U.S. trade policy and global economic relations. In response to the negative consequences of high tariffs, U.S. policymakers began moving toward more open trade practices in later years, exemplified by agreements like GATT (General Agreement on Tariffs and Trade) in 1947. The act highlighted the dangers of protectionism, leading to a consensus among many economists and political leaders that free trade is essential for economic growth and stability in a globalized economy.

Related terms

Tariff: A tax imposed on imported goods, making them more expensive and less competitive compared to domestic products.

Great Depression: A severe worldwide economic downturn that lasted from 1929 until the late 1930s, marked by widespread unemployment and financial hardship.

Protectionism: An economic policy that restricts imports to protect domestic industries from foreign competition, often through tariffs or quotas.