Smoot-Hawley Tariff Act
Definition of 'Smoot-Hawley Tariff Act'
U.S. law enacted in June 1930 which caused an increase in import duties by as much as 50%. The Smoot-Hawley Tariff Act goal was to increase U.S. farmer protection against agricultural imports. Once other sectors caught wind of these changes, a large outcry to incrase tariffs in all sectors of the economy followed. The increase in this tariff added economic strain to countries during the Great Depression. Economists of the time signed a petition to urge President Hoover to not pass the act, but it was signed and passed anyway.
Investopedia explains 'Smoot-Hawley Tariff Act'
In a sign of disapproval towards this act, other countries retaliated and also increased their tariffs. As a result, banks in foreign countries began to fail and international trade declined drastically, resulting in a world trade decline of 66% between 1929 and 1934.
In order to decrease the high tariffs imposed, President Roosevelt passed the Reciprocal Trade Agreements Act in 1934. The United States went on to regain the confidence of foreign countries by encouraging international trade and supporting the General Agreement on Tariffs and Trade (GATT), the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO).