From 1929 to 1932, American imports fell by 40%. This was due in large part to the falling demand for products as a result of the Great Depression. The Tariff Act of 1930 (also known as the Smoot-Hawley Tariff Act) is said to have contributed to only 5% of that fall.
The original intention of the legislation was to protect domestic farmers from foreign imports as well as to protect American jobs. What happened instead was that a bill that was meant to provide relief to farmers morphed into a means to raise tariffs in every sector of the economy.
When all was said and done, the tariff levels were greater than the already high rates that were part of the Fordney-McCumber Act of 1922. They were also marginally lower than the high rates that were part of the Tariff of Abominations of 1828 which led to the Nullification Crisis of 1832 which, in turn, led to the Compromise Tariff of 1833.
The Tariff Act of 1930 didn’t cause the Great Depression. What it did do was create an environment where other governments returned volley by establishing retaliatory measures. This resulted in an unprecedented decline in international trade. In 1929, U.S. exports to Europe stood at $2,341 million USD. Three years later, in 1932, U.S. exports to Europe were a paltry $784 million USD. And as exports continued to decline with each year, the Tariff Act of 1930 did nothing to instill trust between countries, or to encourage and nurture cooperation between countries.
By 1934, politicians in the U.S. got the message and enacted the Reciprocal Trade Agreements Act of 1934. This act emphasized freer international trade, and stepped away from the protectionism mindset that had been central to the Tariff Act of 1930.
This article isn’t about pointing fingers at which nations retaliated against the U.S. for the Tariff Act of 1930. It also isn’t about blaming the U.S. for the substantial drop in exports from, and imports to, America during those years.
One of the best things that arose from the Tariff Act of 1930 is that every imported item must indicate the product’s country of origin. In this way, power is placed in the hands of the final purchaser. He or she can decide if the item “Made In Taiwan” wins over the item “Made In Canada” or if the item “Made In USA” trumps both their labels.
In every good deed lies the possibility the good deed will be made into something negative. In every bad deed lies the opportunity to create something positive from its ashes. If legislation puts your business venture at risk, speak up. If legislation furthers your business venture, speak up. In other words, no matter what direction legislation pulls your business, educate yourself on the pros and cons as they pertain not only to your business, but to the economy overall. In doing so, you are creating the best opportunity to strengthen both your business and the economy.