Tariffs: If you fail to learn from the past…

Tariffs didn’t cause the Great Depression on their own, but they intensified and prolonged it.

Tariffs, especially the Smoot-Hawley Tariff Act of 1930, played a significant role in deepening the Great Depression, though they were not the sole cause. Here’s how tariffs contributed:

1. Smoot-Hawley Tariff Act

• This law raised U.S. tariffs on over 20,000 imported goods to record levels.
• The intention was to protect American farmers and manufacturers by encouraging people to buy domestic products.

2. Retaliation from Other Countries

• Other nations responded by imposing their own tariffs on U.S. goods.
• This led to a collapse in international trade, which had been a key driver of economic growth for many countries, including the U.S.

3. Drop in Global Trade

• As countries raised barriers, exports and imports shrank dramatically.
• This hurt both American exporters and foreign economies that relied on trade with the U.S.

4. Worsening of the Economic Crisis

• Reduced trade meant lower income for businesses, leading to more layoffs and business failures.
• The shrinking global economy further damaged confidence in financial institutions and investments.

5. Tightening of the Global Economy

• The tariff war contributed to the fragmentation of the global economy just when cooperation was needed most.
• It undermined efforts to stimulate demand and deepened the worldwide economic slump.

Summary:

Tariffs like Smoot-Hawley didn’t cause the Great Depression on their own, but they intensified and prolonged it by stifling international trade, prompting retaliatory measures, and hurting global economic cooperation.