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The Editors of Encyclopaedia Britannica Last Updated: Sep 11, 2024 • Article History Table of Contents
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Top Questions What was the Smoot-Hawley Tariff Act?Formally called the United States Tariff Act of 1930, this legislation, originally intended to help American farmers, raised already high import duties on a range of agricultural and industrial goods by some 20 percent. It was sponsored by Sen. Reed Smoot of Utah and Rep. Willis Hawley of Oregon and was signed into law on June 17, 1930, by Pres. Herbert Hoover.
How did the Smoot-Hawley Tariff Act impact the American economy?Economists warned against the act, and the stock market reacted negatively to its passage, which more or less coincided with the start of the Great Depression. It raised the price of imports to the point that they became unaffordable for all but the wealthy, and it dramatically decreased the amount of exported goods, thus contributing to bank failures, particularly in agricultural regions.
Why did the Smoot-Hawley Tariff Act have such a dramatic effect on trade?The punitive tariffs raised duties to the point that countries could not sell goods in the United States. This prompted retaliatory tariffs, making imports costly for everyone and leading to bank failures in those countries that enacted such tariffs. Some two dozen countries enacted high tariffs within two years of the passage of the Smoot-Hawley Tariff Act, which led to a 65 percent decrease in international trade between 1929 and 1934.
Smoot-Hawley Tariff Act, U.S. legislation (June 17, 1930) that raised import duties to protect American businesses and farmers, adding considerable strain to the international economic climate of the Great Depression. The act takes its name from its chief sponsors, Senator Reed Smoot of Utah, chairman of the Senate Finance Committee, and Representative Willis Hawley of Oregon, chairman of the House Ways and Means Committee. It was the last legislation under which the U.S. Congress set actual tariff rates.
The Smoot-Hawley Tariff Act raised the United States’s already high tariff rates. In 1922 Congress had enacted the Fordney-McCumber Act, which was among the most punitive protectionist tariffs passed in the country’s history, raising the average import tax to some 40 percent. The Fordney-McCumber tariff prompted retaliation from European governments but did little to dampen U.S. prosperity. Throughout the 1920s, however, as European farmers recovered from World War I and their American counterparts faced intense competition and declining prices because of overproduction, U.S. agricultural interests lobbied the federal government for protection against agricultural imports. In his 1928 campaign for the presidency, Republican candidate Herbert Hoover promised to increase tariffs on agricultural goods, but after he took office lobbyists from other economic sectors encouraged him to support a broader increase. Although an increase in tariffs was supported by most Republicans, an effort to raise import duties failed in 1929, largely because of opposition from centrist Republicans in the U.S. Senate. In response to the stock market crash of 1929, however, protectionism gained strength, and, though the tariff legislation subsequently passed only by a narrow margin (44–42) in the Senate, it passed easily in the House of Representatives. Despite a petition from more than 1,000 economists urging him to veto the legislation, Hoover signed the bill into law on June 17, 1930.
More From Britannica Causes of the Great DepressionSmoot-Hawley contributed to the early loss of confidence on Wall Street and signaled U.S. isolationism. By raising the average tariff by some 20 percent, it also prompted retaliation from foreign governments, and many overseas banks began to fail. (Because the legislation set both specific and ad valorem tariff rates [i.e., rates based on the value of the product], determining the precise percentage increase in tariff levels is difficult and a subject of debate among economists.) Within two years some two dozen countries adopted similar “beggar-thy-neighbour” duties, making worse an already beleaguered world economy and reducing global trade. U.S. imports from and exports to Europe fell by some two-thirds between 1929 and 1932, while overall global trade declined by similar levels in the four years that the legislation was in effect.
In 1934 President Franklin D. Roosevelt signed the Reciprocal Trade Agreements Act, reducing tariff levels and promoting trade liberalization and cooperation with foreign governments. Some observers have argued that the tariff, by deepening the Great Depression, may have contributed to the rise of political extremism, enabling leaders such as Adolf Hitler to increase their political strength and gain power.
The Editors of Encyclopaedia Britannica This article was most recently revised and updated by Brian Duignan.
