Smoot-Hawley Tariff Act
Candlefocus EditorThe main objective behind the Smoot-Hawley Tariff Act was to stop the flow of foreign goods into the United States that were compromising the American industries and crops, especially in the agricultural sector. Proponents argued that the increased tariffs would help American industry become more competitive, potentially saving jobs and giving farmers an opportunity to receive higher prices for their goods.
Unfortunately, other countries responded to the tariff imposition and raised their own tariffs on American goods in kind. This only intensified trade protectionism, and many countries either implemented economic sanctions or refused to purchase from the United States. Global trade plummeted as a result of these changes, which, regardless of intent, contributed to the depths of the Great Depression. Prior to signing the Smoot-Hawley Tariff Act into law, more than 1,000 economists wrote President Hoover and urged him to veto the legislation.
Unfortunately, Hoover failed to heeded the warnings, and it wasn’t until his successor Franklin D. Roosevelt took office that the United States made a move to reduce tariffs. In 1934, the Roosevelt Administration was granted the authority to negotiate with world leaders under the Reciprocal Trade Agreements Act, which made it possible to eventually establish the United Nations' General Agreement on Tariffs and Trade. This was one of the largest steps towards lowering barriers to trade and liberalizing markets around the world.
Although the Smoot-Hawley Tariff Act was intended to protect domestic industry, its effects were far more damaging to the global economy than expected. The act as a whole served as an important lesson in international economic policy – one that still applies today. Now more than ever, it is essential for countries to come to the negotiation table with the same intention to make trade better for all countries, instead of taking drastic protectionist measures that end in stagnation and depression.