HAWLEY-SMOOT TARIFF

The Hawley-Smoot Tariff Act of June 17, 1930, was the final act in a phase begun in the 1860s, during which, with occasional counter movements, duties on imports increased, particularly under Republican administrations. The destabilizing economic effects of World War I led Congress to raise duties substantially via the Fordney-McCumber tariff in 1922 in response to the traditional protectionist pleas from manufacturers in labor-intensive industries. The trigger for renewed tariff debate in 1929 was the crisis in American agriculture. After facing high prices and increasing indebtedness during the wartime expansion, American farmers experienced an abrupt collapse of prices, land values, and incomes in the early 1920s. With increased world production, the terms of trade shifted against primary producers, especially for staples crops. In response, a vocal and more politically organized farm lobby campaigned for various public policies to alleviate their economic problems. New measures attempted to bolster farm credit, but schemes to raise agricultural prices via federal intervention were vetoed by President Calvin Coolidge in 1927 and 1928.

In 1929 President Herbert Hoover called a special session of Congress to consider the agricultural crisis; one result, fourteen months later, was the Hawley-Smoot Act. The pro-tariff elements among the farming interests included western sugar beet growers, wheat producers, and farmers who were vulnerable to imports from Canada. Once the congressional debate was initiated, these groups formed a coalition with labor-intensive manufacturers; through standard lobbying and political deal-making, the coalition persuaded Congress to extend the scale and scope of the increased duties on agricultural produce and selected manufactured products. In the latter case, the Hawley-Smoot Act built on the 1922 tariff. Overall Hawley-Smoot substantially increased U.S. tariff levels. Indeed, the effective levels of duties, which were fixed in dollar terms, increased steeply as the general level of prices fell during the economic slump. President Hoover had a mixed view of the tariff bill, but was not prepared to veto a measure that was in line with Republican trade policies.

The consequences of the Hawley-Smoot Tariff Act remain debatable. The early and conventional view was that the higher tariffs were a key step in the downward spiral of protectionism in the early 1930s. This interpretation stressed the decline in imports to the United States and the associated fall in incomes overseas as contributing to the international transmission of the slump. Hawley-Smoot was also associated with a spread of protectionism overseas, either in retaliation or in response to the loss of export earnings. More recently, economic historians have noted that trade was a relatively small sector of the U.S. economy, and duties would have advantaged domestic producers, so Hawley-Smoot was not a major contractionary force domestically. Many European nations had already extended their protection of farmers in the late 1920s, so the American action continued a trend rather than initiating it. Even so, Hawley-Smoot signaled an American emphasis on domestic priorities and a further constraint on flows of trade and finance that compounded the destabilization of the international economy in 1930 and 1931.

See Also: INTERNATIONAL IMPACT OF THE GREAT DEPRESSION.

BIBLIOGRAPHY

Eichengreen, Barry. "The Political Economy of the Smoot-Hawley Tariff." Research in Economic History 12 (1989): 1–43.

Engerman, Stanley L., and Robert E. Gallman. The Cambridge Economic History of the United States, Vol. 3: The Twentieth Century. 2000.

Fearon, Peter. War, Prosperity, and Depression: The US Economy, 1917–45. 1987.

Schattschneider, E. E. Politics, Pressure, and the Tariff: A Study of Free Private Enterprise in Pressure Politics, as Shown in the 1929–30 Revision of the Tariff. 1935.

Michael French