Legal Definitions - Tariff Act of 1930

The Tariff Act of 1930, more widely known as the Smoot-Hawley Tariff Act, was a United States federal law enacted during the Great Depression. Its primary goal was to protect American industries and agriculture by imposing exceptionally high taxes, or "tariffs," on imported goods. The Act significantly raised import duties on over 20,000 types of foreign products. While intended to encourage domestic production and consumption, it is widely considered by economists to have worsened the global economic downturn by prompting retaliatory tariffs from other countries, thereby severely restricting international trade and contributing to the deepening of the Great Depression.

Here are some examples illustrating the impact and context of the Tariff Act of 1930:

• Example 1: An American Farmer's Perspective

  Imagine an American dairy farmer in Wisconsin during the late 1920s, struggling to compete with cheaper cheese imported from European countries. This farmer might have strongly supported the passage of the Tariff Act of 1930, believing that the new, higher tariffs on imported dairy products would make foreign cheese more expensive. The expectation was that this would increase demand and prices for domestically produced American cheese, thereby protecting his livelihood and the broader American agricultural sector.

• Example 2: International Retaliation

  Consider Germany, a major exporter of industrial machinery and chemicals to the United States in the early 1930s. When the Tariff Act of 1930 imposed steep duties on these German goods, making them much more expensive for American buyers, the German government might have responded by enacting its own tariffs on American agricultural products, such as wheat or cotton, entering Germany. This scenario directly illustrates how the Smoot-Hawley Tariff Act triggered a cycle of protectionism, where countries imposed retaliatory tariffs, leading to a sharp decline in global trade.

• Example 3: Impact on Consumer Choices and Economic Activity

  Picture an American family in New York City in 1931 looking to purchase a new radio. Before the Act, they might have considered both domestically produced radios and more affordable, high-quality models imported from Japan or Europe. After the Tariff Act of 1930, the prices of these imported radios would have significantly increased due to the tariffs. Simultaneously, American radio manufacturers might have found their export markets shrinking because other countries had imposed retaliatory tariffs on U.S. goods. This dual effect meant fewer affordable choices for consumers and a general contraction of economic activity, demonstrating how the Act contributed to the worsening economic conditions of the Great Depression by stifling both imports and exports.