Tariff Act of 1930

Tariff Act of 1930 was a significant piece of legislation passed by the United States Congress and signed into law by Herbert Hoover, with the aim of protecting American industry and agriculture from foreign competition, as advocated by Republican leaders like Joseph W. Martin Jr. and Nicholas Longworth. The act raised tariffs on imported goods to record levels, affecting trade with countries like Canada, United Kingdom, and Germany. This move was supported by Ford Motor Company, General Motors, and other major American corporations, but opposed by International Chamber of Commerce and World Trade Organization precursor, the International Trade Organization.

Introduction

The Tariff Act of 1930, also known as the Smoot-Hawley Tariff Act, was introduced by Reed Smoot and Willis C. Hawley in response to the Great Depression, which had severe effects on the United States economy, similar to those experienced during the Panic of 1873 and the Panic of 1893. The act was designed to protect American farmers and manufacturers from foreign competition, as suggested by Agricultural Adjustment Administration and National Recovery Administration founders, Henry A. Wallace and Hugh S. Johnson. However, it was met with opposition from economists like John Maynard Keynes, Milton Friedman, and Paul Samuelson, who argued that it would lead to retaliatory measures from other countries, such as France, Italy, and Australia, and ultimately harm international trade.

Background

The Tariff Act of 1930 was passed during a time of great economic uncertainty, with the Wall Street Crash of 1929 still fresh in the minds of investors and consumers. The act was supported by protectionist groups, such as the American Federation of Labor and the National Association of Manufacturers, which argued that it would help to protect American jobs and industry. However, it was opposed by free trade advocates, such as the Cato Institute and the American Enterprise Institute, which argued that it would lead to higher prices and reduced competition, as seen in the Dutch East India Company and British East India Company monopolies. The act was also influenced by the Fordney-McCumber Tariff of 1922, which had raised tariffs on imported goods, and the Revenue Act of 1926, which had reduced taxes on corporations and individuals, as advocated by Andrew Mellon and Calvin Coolidge.

Provisions

The Tariff Act of 1930 raised tariffs on over 20,000 imported goods, including agricultural products, manufactured goods, and raw materials. The act also established the United States Tariff Commission, which was responsible for investigating and recommending tariff rates, as well as the Federal Trade Commission, which was tasked with enforcing the act. The act also included provisions for tariff quotas, which limited the amount of certain goods that could be imported, and tariff ceilings, which set maximum tariff rates for certain goods, as used in the General Agreement on Tariffs and Trade and the North American Free Trade Agreement. The act was supported by industries like steel production, textiles, and automobile manufacturing, which benefited from the higher tariffs, as seen in the growth of General Motors, Ford Motor Company, and United States Steel Corporation.

Economic Impact

The Tariff Act of 1930 had a significant impact on the United States economy, as well as the global economy. The act led to a sharp decline in international trade, as other countries retaliated against the higher tariffs, as seen in the Canadian tariffs and Australian tariffs. The act also led to higher prices for consumers, as imported goods became more expensive, and reduced competition, as domestic industries were protected from foreign competition, as argued by economists like Joseph Schumpeter and Friedrich Hayek. The act was also blamed for exacerbating the Great Depression, as it reduced trade and investment between countries, as seen in the Bank for International Settlements and International Monetary Fund reports. The act was criticized by economists like John Kenneth Galbraith and Paul Krugman, who argued that it was a mistake to raise tariffs during a time of economic crisis, as seen in the Great Recession and the European sovereign-debt crisis.

Legacy

The Tariff Act of 1930 is widely regarded as one of the most protectionist pieces of legislation in United States history, and its impact is still debated among economists and historians today, as seen in the works of Niall Ferguson and Amity Shlaes. The act is often cited as an example of the dangers of protectionism and the importance of free trade in promoting economic growth and prosperity, as argued by World Bank and International Trade Centre reports. The act also led to the establishment of the General Agreement on Tariffs and Trade in 1947, which aimed to reduce tariffs and promote free trade among its member countries, including European Union, Japan, and China. The act's legacy can also be seen in the North American Free Trade Agreement and the World Trade Organization, which have promoted free trade and reduced tariffs among their member countries, as advocated by Bill Clinton, George H.W. Bush, and Ronald Reagan. Category:United States federal legislation