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What is the Smoot-Hawley Tariff?

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Question: What is the Smoot-Hawley Tariff?
Answer: The Smoot-Hawley Tariff Act of June 1930 raised US tariffs to historically high levels. This piece of legislation was originally intended to help protect domestic farmers against agricultural imports. During World War I, countries outside of Europe increased their agricultural production. Then when the war ended, European producers stepped up their production. Thus massive agricultural overproduction occurred during the 1920s. This in turn led to declining farm prices during the second half of the decade. One of Herbert Hoover's campaign pledges during the 1928 election campaign was to aid the American farmer and others by raising tariff levels on agricultural products.

Special Interest Groups and the Tariff

When the bill was introduced in Congress, revisions to the tariff began to grow as one special interest group after another asked for protection. By the time the legislation passed, the bill raised tariffs not only on agricultural products but on products in all sectors of the economy. This bill raised tariff levels even above the already high rates established by the 1922 Fordney-McCumber Act. It also was among the most protectionist tariffs in American history.

Consequences of the Smoot-Hawley Tariff

The Smoot-Hawley Tariff was more a consequence of the Great Depression than an initial cause. However, its passage did not help end the Great Depression and in fact caused more suffering. It provoked a storm of foreign retaliatory measures. It also became a symbol of the "beggar-thy-neighbor" policies (policies designed to improve one's own lot at the expense of others) of the 1930s. This and other policies contributed to a drastic decline in international trade. For example, US imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. In the end, world trade declined by about 66% between 1929 and 1934. In less monetary terms, the Smoot-Hawley Tariff fostered distrust among nations leading to less cooperation in either the political or economic realms.

The Smoot-Hawley Tariff was the beginning of the end of major US protectionism in the 20th century. Beginning with the 1934 Reciprocal Trade Agreements Act, America began to emphasize trade liberalization over protectionism. In later years, the US began to move towards even freer international trade agreements, as evidenced by its support for the General Agreement on Tariffs and Trade (GATT), the North American Free Trade Agreement (NAFTA), and the World Trade Organization (WTO).

Source: US Department of State

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