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The Smoot-Hawley Tariff Act raised tariffs on imported goods to stimulate American consumption and protect jobs during the Great Depression. It was named after its authors, Senators Smoot and Hawley, and fulfilled a campaign promise by President Hoover. The act angered other countries and led to an economic arms race. Its impact on the Depression is debated, but it was repealed in the 1940s. It remains a contentious issue in modern policy debates.
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 goal of the legislation was to dramatically raise tariffs on thousands of imported goods in order to stimulate consumption of American-made products and protect American jobs. The act has historically been viewed as, at best, ineffective 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 chairs: Smoot of the Senate Finance Committee and Hawley of the Senate Ways and Means Committee. At the time, both of these committees were very powerful and, in turn, their chairmen also wielded great influence.
In the Smoot-Hawley Tariff Act, both men were fulfilling a 1928 campaign promise by President Herbert Hoover. Also a Republican, Hoover promised beleaguered American farmers that he would raise the price of foreign agricultural products to help them sell their goods domestically. With Republicans in control of Congress, this was a promise Hoover could keep.
The companion bills were introduced in both the House and 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 featured in the adopted bill. Although Hoover actually opposed the bill because of its likely negative impact on America’s foreign relations, he signed it into law under party pressure and the influence of various American business leaders.
In essence, the act made it very expensive for Americans to purchase a wide variety of foreign-made products, with the understanding that they would buy domestic products instead. This predictably angered all nations involved in commercial trade with the United States. Countries around the world have reacted to the Smoot-Hawley Tariff Act by raising their tariffs. European countries and Canada, which at the time accounted for a large proportion of foreign consumption of American goods, especially hurt American exports by increasing their own.
The tariff levels established by the Smoot-Hawley Tariff Act, both in America and in reactionary ones around the world, largely remained in effect until World War II demands prompted its repeal in the 1940s. While opinions on the effect of the Smoot-Hawley Tariff Act differ, various statistics are often presented in support or in opposition to its success. Notably, 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 almost 25% in 1932.
Proponents of the act, and of protectionism in general, argue that correlation in this case does not equate to causality, and that other factors were more responsible for the duration and severity of the depression. Critics argue that the act prompted a kind of economic arms race, in which national governments ultimately did their economies more harm than good by trying to artificially fix the price of goods. The act has remained a symbolic bone of contention in modern policy debates between economists and 21st-century politicians.
