Smoot-Hawley Tariff

Definition

The Smoot-Hawley Tariff was a U.S. law enacted in 1930 that raised tariffs on hundreds of imported goods in an attempt to protect American industry during the Great Depression. This tariff aimed to boost domestic production by making foreign goods more expensive, but it ultimately led to retaliatory tariffs from other countries, exacerbating the global economic downturn.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff was initially intended to protect American farmers by increasing import duties on agricultural products.
2. This tariff raised duties on over 20,000 imported goods, significantly impacting international trade relationships.
3. Retaliation from other countries led to a decline in U.S. exports, worsening the economic crisis both domestically and internationally.
4. Economists widely criticize the Smoot-Hawley Tariff for deepening the Great Depression due to its negative impact on global trade.
5. The law contributed to a shift towards more cooperative trade policies in subsequent decades, emphasizing the need for multilateral agreements.

Review Questions

• How did the Smoot-Hawley Tariff reflect the economic mindset of the United States during the Great Depression?
  • The Smoot-Hawley Tariff exemplified the economic mindset of protectionism that prevailed in the United States during the Great Depression. With high unemployment and plummeting industrial output, lawmakers believed that raising tariffs would shield American industries from foreign competition and stimulate domestic production. However, this approach backfired as it not only invited retaliation from trading partners but also led to a significant decline in exports, worsening the overall economic situation.
• What were the immediate consequences of the Smoot-Hawley Tariff on international trade and relations?
  • The immediate consequences of the Smoot-Hawley Tariff included a steep rise in tariffs on a wide range of imports, which prompted other countries to retaliate with their own tariffs. This retaliatory action resulted in a dramatic decline in international trade volumes, as countries became increasingly isolated and protective of their own economies. The tariff thus contributed to a downward spiral of global economic activity, intensifying the hardships faced by nations around the world during the Great Depression.
• Evaluate the long-term effects of the Smoot-Hawley Tariff on U.S. trade policy and global economic relations.
  • The long-term effects of the Smoot-Hawley Tariff significantly shaped U.S. trade policy and global economic relations by illustrating the dangers of protectionism. In response to the negative consequences of this tariff, U.S. policymakers shifted towards more open and cooperative trade practices in subsequent decades. This led to the establishment of reciprocal trade agreements and organizations aimed at promoting free trade, ultimately fostering a more interconnected global economy and reducing the likelihood of such protectionist measures being enacted again.

Related terms

Protectionism: An economic policy aimed at shielding domestic industries from foreign competition through tariffs and other trade barriers.

Great Depression: A severe worldwide economic depression that took place during the 1930s, marked by high unemployment, deflation, and a significant drop in industrial output.

Reciprocal Trade Agreements: Agreements between countries that reduce tariffs and trade barriers in order to encourage trade and economic cooperation.