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What is the Smoot-Hawley Tariff Act?

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  • Written By: Mike Howells
  • Edited By: Michelle Arevalo
  • Last Modified Date: 22 September 2016
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The Smoot-Hawley Tariff Act was a law passed in the United States, in 1930, as an attempt to legislatively address the Great Depression and counteract its effects. The specific objective of the legislation was to greatly increase tariffs on thousands of imported goods in order to spur consumption of American-made products, and protect American jobs. The act has historically been considered, at best, ineffectual and, at worst, a failure that significantly prolonged the Depression. It is commonly cited as a prime example of the policy known as protectionism.

It was named for its authors, senators Reed Smoot of Utah and Willis Hawley of Oregon. Both men were Republican committee chairmen — Smoot of the Senate Finance Committee, and Hawley of the Senate Ways and Means Committee. At the time, both these committees were very powerful and, in turn, so too did their chairs wield a great deal of influence.

In the Smoot-Hawley Tariff Act, both men were making good on a 1928 campaign promise of President Herbert Hoover. Also a Republican, Hoover promised beleaguered American farmers that he would increase the price of foreign farm products to help them sell their goods domestically. With Republicans controlling Congress, this was a promise Hoover could keep.

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Companion bills were introduced in both the House and the Senate around 1929. The House passed their version first, and the Senate theirs several months later, in March of 1930. The differences between the two bills were resolved in a negotiated Conference Committee, with many of the higher tariffs present in the adopted House bill. Though Hoover actually opposed the bill due to its likely negative impact on America's foreign relations, he signed it into law in deference to party pressure and the influence of various American captains of industry.

Essentially the act made it very expensive for Americans to purchase a wide variety of foreign-made goods, with the idea that they would instead buy domestic products. This predictably angered all nations involved in commercial trade with the United States. Countries around the world reacted to the Smoot-Hawley Tariff Act by raising their own tariffs. European countries and Canada, accounting for a large proportion of foreign consumption of American goods at the time, did particular harm to American exports by raising theirs.

The tariff levels set by the Smoot-Hawley Tariff Act, both in America and reactionary ones around the world, remained largely in place until the demands of World War II prompted their abrogation in the 1940s. Though opinions on the effect of the Smoot-Hawley Tariff Act differ, various statistics are often presented in support or opposition to its success. In particular, when it was passed in 1930, the unemployment rate in the United States was less than 8%. Within three years it had more than tripled, to nearly 25% in 1932.

Supporters of the act, and of protectionism in general, claim that correlation in this case does not equate to causation, and that other factors were more to blame for the length and severity of the Depression. Critics argue the act provoked a kind of economic arms race, in which national governments ultimately did more harm than good to their economies by trying to artificially set the price of goods. The act has remained a symbolic bone of contention in modern policy debates among 21th century economists and politicians.

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