Smoot-Hawley Tariff Act
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The Smoot-Hawley Tariff Act raised US tariffs on over 20,000 dutiable items to record levels, and, in the opinion of many economists, protracted or initiated the Great Depression. U.S. President Herbert Hoover signed the act into law on June 17, 1930.
The act was championed by Senator Reed Smoot, a Republican from Utah, and Representative Willis C. Hawley, a Republican from Oregon. President Herbert Hoover had asked Congress for a downward revision in rates, but U.S. Congress raised rates instead. While many economists urged a veto, Hoover thought he could finesse the law through the U. S. Tariff Commission, and signed the bill.
Opponents of the measure organized a petition signed by 1,000 economists who expressed concern about anticipated tariff reprisals from other nations.
Although the tariff act was passed after the Stock Market Crash of 1929, many economic historians consider it a factor in deepening the Great Depression. Unemployment was at a troublesome 9 percent in 1930, when the Hawley-Smoot tariff was passed, but it jumped to 16 percent unemployment the next year and 25 percent unemployment two years after that. The annual rate of unemployment in the United States never got back down to the 9 percent level again during the entire decade of the 1930s.
Some economists also view the stock market crash as being a pre-emptive revaluation of stocks based on the news that the tariff act would most likely pass into law. This view is based on the concept that stock markets respond primarily to news about the future.
As nations resorted to protectionism, the general amount of international trade decreased, causing the world economy to slow.
In part as a result of the Hawley-Smoot Tariff and other countries' responses to it, the post-World War II world saw a push towards multilateral trading agreements that would prevent a similar situation from unfolding. This led in part to the Bretton Woods Agreement in 1944 and the General Agreement on Tariffs and Trade (GATT) in the 1950s.
There is still some historical debate as to whether the tariff was directly harmful to the US domestic economy or not. A revenue-generating tariff can be beneficial to an economy, if other countries do not respond with tariffs of their own. However, in classical and neoclassical economic theory, a tariff above a certain level will in and of itself lower revenue, harm trade, and reduce the general welfare.
There has been debate as to whether other countries raised their own tariffs as a result of the Smoot-Hawley Tariff, or if they were simply attempting to accomplish the same goal as the United States. Much of this debate has been centered upon Canada, the United States' largest trading partner, which raised their tariffs substantially in recent years. The cause of the Canadian decision is still disputed, however.
See also
External links
- Smoot-Hawley Tariff page (http://www.state.gov/r/pa/ho/time/id/17606.htm) on the United States Department of State website
- Opinion (http://www.ncpa.org/oped/bartlett/oct2999.html) on the role of the Tariff in the Great Depression from the National Center for Policy Analysis