Eddie Gorman:
Community 
Outreach & Your Voice for Truth in Politics

The Effect of Tariffs on the Great Depression in the 1930s in the USA

Economic Policies and Their Repercussions

The Great Depression, which began in 1929, was a period of severe economic downturn that had devastating effects on the global economy. In the United States, one of the factors that exacerbated the economic crisis was the implementation of high tariffs. These tariffs, designed to protect American industries and jobs, had far-reaching consequences that deepened the depression and hindered economic recovery.

The Smoot-Hawley Tariff Act

In 1930, the U.S. Congress passed the Smoot-Hawley Tariff Act, officially known as the Tariff Act of 1930. Sponsored by Senator Reed Smoot and Representative Willis C. Hawley, the act aimed to protect American farmers and manufacturers from foreign competition by raising import duties on over 20,000 goods. The average tariff rate was increased to approximately 40%, one of the highest levels in U.S. history.

Decline in Exports and Imports

As tariffs were raised, both American exports and imports plummeted. U.S. exports fell by over 60% between 1929 and 1933, while imports declined by more than 66%. The sharp reduction in trade had a devastating impact on industries that relied on foreign markets, leading to widespread layoffs and plant closures. The agricultural sector, which the Smoot-Hawley Tariff Act was supposed to protect, also suffered as other countries imposed tariffs on American agricultural products.

Domestic Economic Consequences

The high tariffs imposed by the Smoot-Hawley Tariff Act also had significant domestic economic consequences. While the intention was to protect American jobs and industries, the reality was that many sectors of the economy were adversely affected.

Increased Consumer Prices

One of the immediate effects of the tariffs was an increase in consumer prices. As imported goods became more expensive due to the high duties, American consumers had to pay higher prices for a wide range of products. This reduction in purchasing power further depressed consumer spending, which was already constrained by rising unemployment and falling incomes. The decrease in consumer demand contributed to the deepening of the economic depression.

Manufacturing and Employment

The manufacturing sector, which was supposed to benefit from reduced foreign competition, also faced significant challenges. The decline in international trade meant that American manufacturers lost access to foreign markets, leading to reduced production and layoffs. Additionally, the higher cost of imported raw materials and components increased production costs for many industries, further squeezing their profit margins.