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. The Dark Side Of The WTO
    Economics

    The Dark Side Of The WTO

  2. Sanctions Between Countries Pack a Bigger ...
    Economics

    Sanctions Between Countries Pack a Bigger ...

  3. Understanding Capital And Financial ...
    Bonds & Fixed Income

    Understanding Capital And Financial ...

  4. The Basics Of Tariffs And Trade Barriers
    Economics

    The Basics Of Tariffs And Trade Barriers

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center