Search by keyword. Congress U. Presidency U. Go to top The Tariff in —11 and in —31 The congressional elections of November, , in which the Hawley-Smoot tariff was made an issue by national spokesmen of the minority party, with promises of early revision if the Democrats were returned to power, resulted in the virtual wiping out of the Republican majorities in the Senate and House, leaving the balance of power in the Seventy-second Congress definitely in the hands of the Progressives.
All Rights Reserved. The Tariff in As a writer for The Balance, Kimberly provides insight on the state of the present-day economy, as well as past events that have had a lasting impact. She has been working in the financial planning industry for over 20 years and spends her days helping her clients gain clarity, confidence, and control over their financial lives. It also contributed to the start of World War II. In June , Smoot-Hawley raised already high U.
The purpose was to support U. Instead, it raised food prices. It also compelled other countries to retaliate with their own tariffs. Smoot-Hawley showed how dangerous trade protectionism is for the global economy. Since then, most world leaders advocate free trade agreements that promote increased trade for all participants. America had many characteristics of a traditional economy prior to the Depression. High demand for food created speculation in farmland. By the s, farmers had taken on debt to fund growth and pay for the land.
As Europe recovered, food prices abruptly returned to normal but debt-laden U. Congress wanted to protect American farmers from the now cheap agricultural imports. It had proposed other bills to support prices and subsidize food exports, but President Calvin Coolidge had vetoed them all. It sought to raise farm tariffs to the same level as tariffs on manufactured goods. Raising tariffs had worked with the Fordney-McCumber Tariff in The Tariff Act is named after its sponsors.
Senator Reed Smoot wanted to protect the sugar beet business in his home state of Utah. As the bill wound its way through Congress, every legislator wanted to add protections for their states' industries.
By , the bill proposed tariffs on 20, imported goods. Economists, business leaders, and newspaper editors completely opposed the bill. They knew it would become a barrier to international trade , other countries would retaliate, and the tariffs would also raise import prices.
Congress debated the bill as the stock market crashed in October During his presidential campaign, Herbert Hoover argued for more tariff equality. As president, he made good on his promise. The timing of the bill's passage through Congress affected the stock market. Millions of Americans had just lost everything in the stock market crash. Overnight, imports became unaffordable luxuries for all but the wealthy. In one campaign speech he declared:. How many thousands of American workmen are living on Canadian money today?
I will not beg of any country to buy our goods. I will make [tariffs] fight for you. I will use them to blast a way into markets that have been closed. Bennett handily won the election and pushed through the Canadian Parliament further tariff increases.
If there was retaliation for Smoot-Hawley, was this enough to have made the tariff a significant contributor to the severity of the Great Depression? Most economists are skeptical because foreign trade made up a small part of the U. Table 2 gives values for nominal GDP, for real GDP in dollars , for nominal and real net exports, and for nominal and real exports. I, , Washington, D. If we focus on the decline in exports, we can construct an upper bound for the negative impact of Smoot-Hawley.
Between and , real exports declined by an amount equal to about 1. Declines in aggregate expenditures are usually thought to have a multiplied effect on equilibrium GDP. The best estimates are that the multiplier is roughly two. In that case, real GDP would have declined by about 3. Real GDP actually declined by about The decline in real exports, then, may well have played an important, but not crucial, role in the decline in GDP during the first two years of the Depression.
Bear in mind, though, that not all — perhaps not even most — of the decline in exports can be attributed to retaliation for Smoot-Hawley. Even if Smoot-Hawley had not been passed, U. Congressional legislation is often referred to by the names of the member of the House of Representatives and the member of the Senate who have introduced the bill. Tariff legislation always originates in the House of Representatives and according to convention the name of its House sponsor, in this case Representative Willis Hawley of Oregon, would precede the name of its Senate sponsor, Senator Reed Smoot of Utah — hence, Hawley-Smoot.
In this instance, though, Senator Smoot was far better known than Representative Hawley and so the legislation is usually referred to as the Smoot-Hawley Tariff. The more formal name of the legislation was the U. Tariff Act of Schlesinger, Jr. Israel, and William P. Trade statistics for this period can be found in U. Washington, D. A classic account of the political process that resulted in the Smoot-Hawley Tariff is given in E.
The Jones book should be used with care; his argument is generally considered to be overstated. The view that party politics was of supreme importance in passage of the tariff is well argued in Robert Pastor, Congress and the Politics of United States Foreign Economic Policy, , Berkeley: University of California Press, See, also, the article by Barry Eichengreen listed below.
Callahan, Colleen, Judith A. Crucini, Mario J. Eichengreen, Barry. Irwin, Douglas. Irwin Douglas and Randall S. Please read our Copyright Information page for important copyright information. Send email to admin eh. Newsletters To join the newsletters or submit a posting go to click here.
During the campaign Hoover had focused on plans to raise tariffs on farm products, but the tariff plank in the Republican Party platform had actually referred to the potential of more far-reaching increases: [W]e realize that there are certain industries which cannot now successfully compete with foreign producers because of lower foreign wages and a lower cost of living abroad, and we pledge the next Republican Congress to an examination and where necessary a revision of these schedules to the end that American labor in the industries may again command the home market, may maintain its standard of living, and may count upon steady employment in its accustomed field.
The Basic Macroeconomics of the Tariff Economists are almost uniformly critical of tariffs. Did Retaliation Take Place? In a speech, King made clear the retaliatory nature of these increases: [T]he countervailing duties? In one campaign speech he declared: How many thousands of American workmen are living on Canadian money today? Hawley-Smoot or Smoot-Hawley: A Note on Usage Congressional legislation is often referred to by the names of the member of the House of Representatives and the member of the Senate who have introduced the bill.
Recent journal articles that deal with the issues discussed in this entry are: Callahan, Colleen, Judith A.
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