Smoot-Hawley Tariff Act

AAA

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).

RELATED TERMS
  1. North American Free Trade Agreement ...

    A regulation implemented on Jan. 1, 1994, that decreased and ...
  2. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  3. Tariff War

    An economic battle between two countries in which Country A raises ...
  4. United Nations Commission on International ...

    A United Nations-sponsored commission that seeks to create a ...
  5. Import Duty

    A tax collected on imports and some exports by the customs authorities ...
  6. World Trade Organization - WTO

    An international organization dealing with the global rules of ...
Related Articles
  1. Economics

    The Dark Side Of The WTO

  2. Sanctions provide a relatively non-violent alternative to outright war.
    Economics

    Sanctions Between Countries Pack a Bigger ...

  3. Bonds & Fixed Income

    Understanding Capital And Financial ...

  4. Economics

    The Basics Of Tariffs And Trade Barriers

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center