Hawley-Smoot Tariff Act of 1930
The Hawley-Smoot Tariff Act, signed into law by President Herbert Hoover in June 1930, aimed to raise tariff rates on agricultural and imported goods during a period marked by the onset of the Great Depression. Driven by pressure from farmers and manufacturers, the act emerged from a historical context of protective tariffs that had generated both support and controversy in the U.S. economy. While intended to protect American industries and agriculture, the act faced significant opposition, including concerns from economists about potential retaliatory measures from other nations.
Once enacted, the Hawley-Smoot Tariff led to a substantial decline in international trade, with U.S. imports and exports plummeting significantly in the early 1930s. Many countries retaliated by imposing their own tariffs, further exacerbating the global economic downturn. Although opinions vary on the extent of its impact, the act is often cited as a contributing factor to the worsening of the economic situation during the Great Depression, marking a turning point in U.S. trade policy. The widespread fallout from the act ultimately discredited high tariffs as a viable economic strategy and paved the way for later initiatives promoting free trade.
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Hawley-Smoot Tariff Act of 1930
The Law Raised U.S. Tariffs on imported goods
Also known as Smoot-Hawley Tariff Act of 1930, Tariff Act of 1930
Date June 17, 1930
The Hawley-Smoot Tariff Act, which raised U.S. tariffs to their highest levels in history and has been cited as a significant contributor to the Great Depression, marked the decline of tariffs as a means of furthering protectionist economic policy and as a major source of income for the U.S. government.
By the time U.S. president Herbert Hoover signed the Hawley-Smoot Tariff Act in June, 1930, the United States was experiencing the early effects of what became the longest and most devastating economic depression in American history and the catalyst for a global depression of unprecedented proportions. However, the inspiration for the act originated in issues and debates that predated the events leading to the Great Depression.
Protective tariffs, favored by midwestern farmers and northern manufacturers and opposed by laborers and southern planters, had been a source of both revenue and controversy throughout the nineteenth and early twentieth centuries. The economic growth of the 1920’s had been a boon to manufacturers, but the global economic ramifications of World War I had encouraged overproduction of American agricultural goods, leading to falling prices and prompting farmers to increase their calls for government intervention in international trade. The Fordney-McCumber Tariff of 1922 raised tariff rates to their highest levels in American history, but pressure from farmers’ organizations to raise tariffs persisted further during the late 1920’s. During the presidential campaign of 1928, Hoover, then a candidate for president, promised to raise tariffs on farm products if elected. Following the election of Hoover, Congressman Willis C. Hawley, a Republican from Oregon, and Senator Reed Smoot, a Republican from Utah, introduced a bill in April, 1929, that would have increased tariff levels on agricultural and other imported goods.
By the time debate of the bill began, the U.S. economy had already begun a downturn that intensified following the stock market crash of October, 1929; this heightened pressure on Congress from farmers and industrialists to pass the bill. It passed rapidly through the Republican-dominated House of Representatives but stalled in the Senate because of opposition from a minority of progressive Republicans who opposed the protectionist aims of the bill. Debate of the bill continued in the Senate through 1929 and into 1930 as the economy worsened. Many economists opposed the bill, fearing reprisals from foreign governments. Pressure from constituents led many midwestern progressives to abandon their opposition, and a final version of the bill passed both houses in June, 1930. Hoover signed it into law on June 17.
The Hawley-Smoot Tariff Act took effect just as the U.S. economy was showing signs of possible recovery. However, as its effects rippled throughout international markets, domestic production and international trade resumed a downward trend. Many foreign countries responded to the act by enacting retaliatory tariffs and other restrictions on trade with the United States; in 1930, the Canadian parliament passed legislation raising tariffs on certain products imported from the United States to levels commensurate with those set forth in the Hawley-Smoot Act. Between 1929 and 1932, U.S. imports of European goods declined more than 70 percent, and U.S. exports of goods to Europe declined more than 65 percent, contributing to an overall decline of more than 60 percent in world trade between 1929 and 1934. Although much of this decline was the result of other economic forces, many economists estimate that around 20 to 25 percent of these declines were attributable to the effects of the Hawley-Smoot Tariff Act.
Impact
Although the true effects of the Hawley-Smoot Tariff Act remain the subject of debate, the act is commonly regarded as a contributor to the decline of the global economy during the Great Depression. By contributing to a general decrease in international trade, the act harmed the U.S. agricultural and industrial interests that it was designed to protect and hampered the recovery of European economies ravaged by the effects of World War I. The effects of the act upon global markets during the Great Depression discredited the concept of tariffs as effective economic policy, fueling twentieth century trends toward free trade and reciprocal treaties among global trading partners. The Reciprocal Trade Agreements Act of 1934, a response to the Hawley-Smoot Act, authorized the U.S. government to negotiate with other countries for bilateral tariff reductions, setting a precedent for free trade agreements that defined subsequent international trade. The act led to the decline of tariffs as a major source of revenue for the U.S. government, increasing the role of federal income taxes as a revenue source.
Bibliography
Eckes, Alfred. Opening America’s Market: U.S. Foreign Trade Policy Since 1776. Chapel Hill: University of North Carolina Press, 1995.
Koyama, Kumiko. “The Passage of the Smoot-Hawley Tariff Act: Why Did the President Sign the Bill?” Journal of Policy History 21, no. 2 (2009): 163-186.
McElvaine, Robert S. The Great Depression: America 1929-1941. New York: Times Books, 1993.
Termin, Peter. Lessons from the Great Depression. Cambridge, Mass.: MIT Press, 1989.