Smoot-Hawley Tariff Act

Specialization in global markets can allow for better and more efficient use of resources in our global economy. This generalization is true but only applies fully when complete free trade is an option in our markets. As a general trend, the United States has moved closer and closer towards open markets. Even so, a number of tariffs in the United States have been put in place, and some have had enormous consequences. One of the largest American tariffs was known as the Smoot-Hawley Tariff Act. 

The Act started out as a measure of protection for the new agricultural industry inside of the US in the 1920s. At the time, most economic sectors were faring well, and the government felt that it would be a good time to try to build the farming industry up by protecting it from foreign competition. However, the bill to put in place the tariff was soon jumped on by congress. A large number of lawmakers wanted to gain their constituent's support by protecting specific industries in their region. Many debates and compromises followed, but what ended up happening was a sort of trade-off between congresspeople where each legislator would support other tariffs in exchange for gaining support for their own personal tariffs. By the time this feeding-frenzy of voter pleasing tariff creation had finished, over 800 tariffs were suggested. 

While the bill was being debated, the stock market collapsed. As a result, a wave of isolationism and protectionist politics swept the country. The bill was passed in congress and went to President Hoover to be signed into effect. Hoover received a signed petition from over 1000 economists arguing that the tariffs were a horrible idea. President Hoover signed the bill anyways to enact the tariffs in an attempt to protect struggling US companies. This tariff raised import duties by an average of 20%. The goal was to help sustain new growth in local industries inside of the United States. 

Over the next 4 years though, US trade with Europe fell by 2/3, and global trade fell by around 26%.  After 4 years of struggling world trade, President Roosevelt negated most of the tariffs by passing the Reciprocal Trade Agreements Act, but the damages had been enough for the Smoot-Hawley Tariff Act to remain considered as one of the most damaging tariffs in the history of the United States. In 1932, both Smoot and Hawley, the original proponents of the act, were voted out of congress.

Sources:
https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act
https://www.npr.org/2018/04/05/599707003/smoot-hawley-tariff-act-a-classic-economics-horror-story
https://news.law.fordham.edu/jcfl/2019/03/17/a-brief-history-of-tariffs-in-the-united-states-and-the-dangers-of-their-use-today/