Smoot-Hawley Tariff Act
, U.S. legislation (June 17, 1930) that raised import duties to protect American businesses and farmers, adding considerable strain to the international economic climate of the
Great Depression
. The act takes its name from its chief
sponsors
, Senator
Reed Smoot
of
Utah
, chairman of the Senate Finance Committee, and Representative
Willis Hawley
of
Oregon
, chairman of the House Ways and Means Committee. It was the last legislation under which the
U.S. Congress
set actual
tariff
rates.
The Smoot-Hawley Tariff Act raised the
United States’s
already high tariff rates. In 1922
Congress
had enacted the
Fordney-McCumber Act
, which was among the most punitive protectionist tariffs passed in the country’s history, raising the average import tax to some 40 percent. The Fordney-McCumber tariff prompted retaliation from European governments but did little to dampen U.S. prosperity. Throughout the 1920s, however, as European farmers recovered from
World War I
and their American counterparts faced intense competition and declining prices because of overproduction, U.S. agricultural interests lobbied the federal government for protection against agricultural imports. In his 1928 campaign for the presidency,
Republican
candidate
Herbert Hoover
promised to increase tariffs on agricultural goods, but after he took office lobbyists from other economic sectors encouraged him to support a broader increase. Although an increase in tariffs was supported by most Republicans, an effort to raise import duties failed in 1929, largely because of opposition from centrist Republicans in the
U.S. Senate
. In response to the
stock market crash of 1929
, however,
protectionism
gained strength, and, though the tariff legislation subsequently passed only by a narrow margin (44?42) in the Senate, it passed easily in the
House of Representatives
. Despite a petition from more than 1,000 economists
urging
him to veto the legislation, Hoover signed the bill into
law
on June 17, 1930.
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Causes of the Great Depression
Smoot-Hawley contributed to the early loss of confidence on
Wall Street
and signaled U.S.
isolationism
. By raising the average tariff by some 20 percent, it also prompted retaliation from foreign governments, and many overseas banks began to fail. (Because the legislation set both specific and ad valorem tariff rates [i.e., rates based on the value of the product], determining the precise percentage increase in tariff levels is difficult and a subject of debate among economists.) Within two years some two dozen countries adopted similar “beggar-thy-neighbour” duties, making worse an already beleaguered world economy and reducing global trade. U.S. imports from and exports to Europe fell by some two-thirds between 1929 and 1932, while overall global trade declined by similar levels in the four years that the legislation was in effect.
In 1934 President
Franklin D. Roosevelt
signed the
Reciprocal Trade Agreements Act
, reducing tariff levels and promoting trade liberalization and cooperation with foreign governments. Some observers have argued that the tariff, by deepening the Great Depression, may have contributed to the rise of political
extremism
, enabling leaders such as
Adolf Hitler
to increase their political strength and gain power.