Smoot-Hawley Tariff Act

Definition

The Smoot-Hawley Tariff Act was a United States federal law that raised import tariffs to historically high levels, enacted in 1930. This act is closely tied to the topics of how governments enact trade policy globally, regionally, and nationally, as well as the tradeoffs of trade policy.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff Act raised import tariffs to an average of over 50%, the highest level in U.S. history at the time.
2. The act was intended to protect American businesses and farmers from foreign competition, but it ultimately contributed to the Great Depression by sparking retaliatory tariffs from other countries.
3. The Smoot-Hawley Tariff Act was a major shift in U.S. trade policy, moving away from the free trade policies of the previous decades.
4. The act was heavily criticized by economists and policymakers, who argued that it would harm the U.S. economy by reducing international trade and raising consumer prices.
5. The Smoot-Hawley Tariff Act is considered one of the key factors that exacerbated the Great Depression and led to a decline in global trade.

Review Questions

• Explain how the Smoot-Hawley Tariff Act was an example of a government enacting trade policy nationally.
  • The Smoot-Hawley Tariff Act was a unilateral decision made by the U.S. government to raise import tariffs, without international coordination or cooperation. This was a national-level trade policy that was intended to protect domestic industries, but ultimately had negative consequences for the U.S. economy and global trade. The act demonstrates how governments can use trade policy tools, such as tariffs, to influence the flow of goods and services across their borders, often with significant domestic and international implications.
• Describe the tradeoffs of the Smoot-Hawley Tariff Act in terms of its impact on the U.S. economy and global trade.
  • The Smoot-Hawley Tariff Act was intended to protect American businesses and farmers from foreign competition, but it ultimately had unintended consequences that highlighted the tradeoffs of such protectionist trade policies. While the act may have provided short-term benefits to some domestic industries, it led to retaliatory tariffs from other countries, which reduced international trade and contributed to the severity of the Great Depression. This demonstrates how trade policies can have complex and far-reaching effects, often resulting in tradeoffs between domestic and global economic interests, as well as between short-term and long-term outcomes.
• Analyze how the Smoot-Hawley Tariff Act influenced the global economic landscape and the subsequent shift in U.S. trade policy.
  • The Smoot-Hawley Tariff Act had a significant impact on the global economic landscape, as it sparked a trade war and contributed to the decline in international trade during the Great Depression. This experience led to a shift in U.S. trade policy, moving away from the protectionist approach of the Smoot-Hawley Act towards more open and cooperative trade agreements, such as the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). This shift recognized the importance of global economic integration and the potential drawbacks of unilateral trade policies, highlighting the need for multilateral cooperation and the consideration of broader economic and political factors in the formulation of trade policy.

Related terms

Tariff: A tax or duty imposed on imported goods, typically to protect domestic industries from foreign competition.

Protectionism: An economic policy of restricting imports from other countries through methods such as tariffs, quotas, or subsidies to domestic producers.

Trade War: A situation in which countries raise or create tariffs or other trade barriers against each other in an attempt to protect their own domestic industries.