Although the Great Depression was not caused by one particular thing, the introduction of high tariffs certainly did not help the mater. After the great war ended american business was booming, countries were not only rebuilding and needed plenty of materials, but since they were rebuilding, they had no factories to compete with America. However this did not last for ever, after a relatively short time they’re factories and agricultural collectors were producing almost as much as before. This rebuilding meant that American businesses now had competition, both abroad as well as back home. Meaning that they no longer could sell as much as before. The popular view at the time was that if they wanted to prevent sales from other countries, then all they would need to do was to put in protective tariffs. Meaning that the foreign countries goods would now cost so much in America that the American business owners would no longer have to worry about losing sales back home, allowing them to focus their efforts abroad.
The first of these protective tariffs was the 1922 Fordney-McCumber Act, which raised the tax rate to an although high rate still allowed for the sale of foreign good. US imports from Europe fell from $1,334 million in 1929, to $390 million in 1932. Although the tax rate set by this new act was high and did what it was supposed to, manufacturers still demanded higher protective tariffs to prevent the remaining foreign sales. In 1930 the Smoot-Hawley Tariff was passed. This new tariff raised the tax rate well beyond the already high rate of the Fordney-McCumber Act. Although these tariffs did do their intended job to an extent, they also had an unintentional side effect, they gave other countries the same idea. And just as the US had done, they followed suit. This raising of rates meant that the foreign trade from the US to Europe dropped from $2,341 million to only $784 million in 1932. Overall US foreign trade dropped 66% in the five years between 1929 and 1934. These Tariffs meant that not only was US manufacturing experiencing a severe decline, but foreign relations was also taking a hit, all of this adding to a worsening situation in the US.
Sources:
http://future.state.gov/when/timeline/1921_timeline/smoot_tariff.html
I see what you're saying about tariffs prohibiting foreign trade, but why was there such high demand for the tariffs? It seems to me that any informed voter would see that the result of protective tariffs would not benefit the US. I guess the average American voter didn't study economics.
ReplyDeleteSource:
http://americastradepolicy.com/did-the-smoot-hawley-tariff-cause-the-great-depression/#.Vl4 6Pm Q8A
I think this is very informative in a very short way. Do you believe what the Americans were doing with their tariffs was effective? They did take it too far but if they didn't do you believe it would have worked out for them? Do you believe that these tariffs affected how tariffs are today?
ReplyDeletesource-https://en.wikipedia.org/wiki/Tariffs_in_United_States_history
I think that tariffs were a good idea, but not how they were implemented, nor the reasoning behind them. The tariffs were definitely way to high, and less severe ones probably would have helped more than harmed. But since the tariffs were put into place with the goal of stopping the selling of foreign goods, low tariffs never would have lasted, there would always be demands to raise them. The idea of protective tariffs in this case and any other is fundamentally flawed, however tariffs simply designed to raise revenue do work and I think during the great depression, the American people realised that, and changed the way tariffs were constructed.
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