Hawley-Smoot Tariff Act

Amongst the umpteen number of tariff acts passed by the Congress of the USA, there were some which created a flurry of events and some path-breaking consequences. Be it the Tariff of 1832 or Tariff of Abominations, all have had far reaching effects on the socio-economic conditions of USA. There is nothing alarming that these changes happened, especially when the country is developing and growing. A similar happening which significantly altered the face of American economy was the Hawley-Smoot Tariff Act or Smoot-Hawley Tariff Act, 1930. Here is more about this act and its consequences.

What was the Hawley-Smoot Tariff Act?

The Hawley-Smoot Tariff act was sponsored by representative Wills Haley and US Senator Reed Smoot. Simply put, this act of 1930, passed on June 17, led to raise in US tariff levels to an all time high in the history of US economy. The tariffs were raised for almost 20,000 imported goods, initially meant to aid local farmers against agriculture imports, on the background of the Great Depression. In the second half of the decade of the period of World War 1, there was huge amount of agricultural over production in the 1920s in countries, as post war the European countries increased their agricultural production. Now the farm produce prices came down as a result of over production in the second half of that decade. That is when Herbert Hoover declared in 1928 campaign election, that his agenda was to help the farmers by raising the tariff levels on agricultural products. Passing this act was a roller coaster ride, as when the bill was introduced in the Congress, the US Constitution revisions on the tariff seemed endless, thanks to umpteen special interest groups. Eventually, when this bill was passed, it raised tariff levels more than the high rates existent as a result of the 1922 Fordney-McCumber Act.

Now that we know what this tariff was all about, lets us take a look at the consequences of this act.

Repercussions of the Hawley-Smoot Tariff Act of 1930

At the onset, it this act seemed to be success. As the global political and economic events unfolded, the huge chinks in the Hawley-Smoot armor became evident. But considering the larger picture, this was the beginning of what seemed to end a period of over a century of protectionist acts passed by the US Congress. But to come to the immediate effects, Hawley-Smoot Tariff Act did not help salvage the pitiful economic condition the country was facing. In fact, even before the act was passed, foreign governments with which the USA traded, took steps towards increasing rates against the American products. Interestingly, notes of protest from trade partners of the USA mentioning retaliatory actions were sidelined by Hoover administration. A good 23 trade partners had sent these protest notes. One of the major retaliatory happenings were taken by Canada. and it imposed new tariffs on 16 products in 1930. Now these goods accounted for no less than 30% of the overall US exports to Canada.

Drastic repercussions like decrease in US imports from a 1929 high of $1,334 million to just $390 million in 1932 and falling of U.S. exports to Europe from $2,341 million in 1929 to $784 million in 1932 were seen. Some economic experts also opined that Great Depression was a result of this act, as eventually, the world trade dropped down around 66% in the period between 1929 and 1934.

But as they say all is well as that ends well and whatever happens, happens for good. The one positive thing which came out of the Hawley-Smoot Tariff Act was that the American economy starting taking baby steps in the direction of trade liberalization, instead of the closed economy and over protectionism. That's all for now.