Hawley-Smoot Tariff of 1930: Definition & Overview

Instructor: Jason McCollom
As the U.S. sank deeper into the economic abyss of the Great Depression, Congress passed the Hawley-Smoot Tariff. Widely considered a disaster, read about the tariff and quiz yourself.

The Great Depression

You've probably learned that if there are competing sellers of a particular product, prices for that product become more affordable. But as a seller, what if you could add a tax to your competitors' prices while exempting your prices from the tax? This might sound like a good deal for your business, but there are unseen consequences of such a tax.

A tax on imports is called a tariff. Enacting high tariff rates is also referred to as economic protectionism, because domestic industries, businesses, and agricultural goods are 'protected' from foreign competition. To learn about tariffs and the consequences of protectionism, let's read about the Great Depression and the Hawley-Smoot Tariff of 1930 (also referred to as the Smoot-Hawley Tariff).

In 1929, the U.S. stock market crashed, marking the beginning of the Great Depression of the 1930s. This was the worst economic decline in American history. Here are some statistics to illustrate: 9,000 banks closed between 1929 and 1933. U.S. Gross National Product plummeted from $103 to $58 billion during that same period. And by 1933, twenty-five percent of Americans were without a job.

Other countries weren't spared such suffering. The world economy collapsed, too, in the early 1930s.

The Hawley-Smoot Tariff of 1930

U.S. officials scrambled to address this unprecedented economic calamity. One solution, argued congressmen, was to help American farmers, who were suffering disproportionately in comparison to their industrial brethren. Two leading Republican legislators--Senator Reed Owen Smoot of Utah, and Representative Willis C. Hawley of Oregon--argued that agricultural tariffs should be raised significantly.

Representative Hawley and Senator Smoot
smoot hawley

A tariff is a tax on imports. The so-called Hawley-Smoot Tariff called for a significant rise in tariff rates on farm products imported into the country. This would, they argued, increase the sales of American farm products because they would be cheaper than foreign products that had a tariff attached to the prices.

As the Hawley-Smoot Tariff made its way through Congress, corporate lobbyists attached to the bill dozens of new tariffs on imported manufactured goods. Thus, the bill ultimately raised tariff rates not only on foreign farm products but also on a variety of imported factory-made products.

When the Hawley-Smoot Tariff arrived on the desk of President Herbert Hoover, many voices were calling for a veto. Over 1,000 economists, for instance, urged Hoover to block the tariff, asserting that it would result in rising prices across the board by blocking imports and hindering economic competition. And one of Hoover's advisors, Thomas Lamont of J.P. Morgan & Co., remembered, 'I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff.'

Herbert Hoover
hoover

The Effect of the Hawley-Smoot Tariff

Hoover disregarded these dissenting voices and signed into law the Hawley-Smoot Tariff in June 1930. It raised tariff rates on agricultural and manufactured goods to the highest levels in American history. Some of the rates increased 50% and above.

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