Smoot–Hawley Tariff Act
스무트-홀리 관세법
The protectionist tariff law signed by President Hoover on 17 June 1930 and named after its Republican sponsors, Senator Reed Smoot and Representative Willis C. Hawley. Meant to shield American farms and industry from foreign competition at the onset of the Depression, it raised duties on more than 20,000 imported goods, but trading partners retaliated with tariffs of their own and American exports and world trade plummeted. It is counted among the steps by which the world economy of the 1930s split into tariff walls and currency blocs.
In depth
In 1927 the League of Nations' World Economic Conference in Geneva reported that "the time has come to put an end to tariffs, and to move in the opposite direction", yet many governments raised them. In the 1928 campaign Hoover promised higher tariffs on farm products to help struggling farmers, and in May 1929 the House passed a bill raising duties on both farm and manufactured goods. Smoot, chairman of the Senate Finance Committee, argued that higher tariffs would cure overproduction, though the United States was then running a trade surplus.
In May 1930, 1,028 economists signed a petition asking Hoover to veto the bill (more than 1,250 signed in the end), and the car maker Henry Ford called it "an economic stupidity". Hoover nonetheless signed on 17 June, yielding to pressure from his party, his cabinet and business leaders. Boycotts had begun when the House passed the bill in May 1929, and by that September 23 trading partners had sent protest notes. In May 1930 Canada, the most loyal US trading partner, imposed new tariffs on 16 products that made up about 30 percent of American exports to it, and Cuba, Mexico, France, Italy, Spain, Argentina, Australia, New Zealand and Switzerland also retaliated.
US imports fell 66 percent, from $4.4 billion in 1929 to $1.5 billion in 1933, and exports 61 percent, from $5.4 billion to $2.1 billion. Most of the fall in trade came from the collapse of output in the United States and the world, but there was an additional decline: American exports to countries that protested fell 18 percent, and to those that retaliated 31 percent. Economists and historians widely regard the act as a policy misstep, and it remains a cautionary example of protectionism. Both Smoot and Hawley lost their seats in 1932.
The tariff war split the world economy into blocs. At Ottawa in 1932 Britain agreed Imperial Preference with the Dominions and colonies on the principle of "home producers first, empire producers second, and foreign producers last", and the countries that pegged to sterling after it left gold in 1931 formed the sterling area. The French-led gold bloc held to gold while raising tariffs and tightening import quotas, and Germany built a network of bilateral clearing trade that needed no foreign exchange.
The Democrats pledged lower tariffs in 1932, and Roosevelt's Reciprocal Trade Agreements Act of 1934 let the president cut tariffs through bilateral negotiation. After the Second World War this approach led to the multilateral tariff reductions of the General Agreement on Tariffs and Trade (GATT) of 1947.