Instant Insight

30-Second Take

• The Smoot-Hawley Tariff Act of 1930 significantly contributed to the worsening of the Great Depression.
• The act raised import duties, leading to widespread retaliation from other countries and a sharp decline in global trade.
• Economists agree that while the tariff did not cause the Great Depression, it exacerbated its effects.

Quick Brief

2-Minute Digest

Essential Context

The Smoot-Hawley Tariff Act, signed into law on June 17, 1930, was designed to protect American businesses and farmers by increasing tariffs on imported goods. However, this protectionist policy had far-reaching and devastating consequences.

Core Players

• Reed Smoot – U.S. Senator from Utah and co-sponsor of the act.
• Willis Hawley – U.S. Representative from Oregon and co-sponsor of the act.
• Herbert Hoover – President of the United States who signed the act into law.
• Franklin D. Roosevelt – President who later signed the Reciprocal Trade Agreements Act to reduce tariffs.

Key Numbers

• 40% – Average import tax rate prior to Smoot-Hawley under the Fordney-McCumber Act.
• 20% – Additional increase in the average tariff rate due to Smoot-Hawley.
• 66% – Decline in international trade between 1929 and 1934.
• 25% – Unemployment rate in the U.S. by 1932-1933.

Full Depth

Complete Coverage

The Catalyst

The Smoot-Hawley Tariff Act was enacted in response to the economic downturn following the stock market crash of 1929. It was intended to protect American farmers and businesses by increasing tariffs on imported goods.

However, the act triggered a global trade war as other countries retaliated with their own tariffs, further exacerbating the economic crisis.

Inside Forces

The passage of the Smoot-Hawley Tariff Act was driven by strong lobbying from agricultural interests and other economic sectors. Despite opposition from many economists, who warned of the potential negative consequences, the act was signed into law by President Trump.

The immediate effects seemed positive, with initial increases in factory payrolls, construction contracts, and industrial production. However, these gains were short-lived as the global economy continued to deteriorate.

Power Dynamics

The act significantly altered the global trade landscape, leading to a sharp decline in international trade. The U.S. saw its imports decrease by 66% and exports by 61% between 1929 and 1933.

Countries like Canada, which had been a major trading partner, retaliated by imposing their own tariffs, further straining economic relations.

Outside Impact

The global reaction to the Smoot-Hawley Tariff Act was swift and severe. Over 25 countries increased their own tariffs on American goods, leading to a global trade war that worsened the Great Depression.

The act had particularly dire consequences for countries already struggling with debt and economic instability, such as Germany, which saw its economic situation deteriorate further.

Future Forces

The lessons learned from the Smoot-Hawley Tariff Act have shaped international trade policies for decades. The Reciprocal Trade Agreements Act of 1934, signed by President Franklin D. Roosevelt, marked a significant shift towards trade liberalization.

Today, these historical events serve as a cautionary tale about the dangers of protectionist policies and the importance of international cooperation in maintaining global economic stability.

Data Points

• June 17, 1930: Smoot-Hawley Tariff Act signed into law.
• 1929-1933: U.S. imports decreased by 66%, exports by 61%.
• 1931: Creditanstalt of Austria failed, highlighting global economic deficiencies.
• 1932: Unemployment rate in the U.S. reached 25%.
• 1934: Reciprocal Trade Agreements Act passed to reduce tariffs.