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. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center