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Tariffs can help or hurt the economy explain the Hawley-Smoot Act with this in mind.

Tariffs can help or hurt the economy explain the Hawley-Smoot Act with this in mind.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Tariffs can help or hurt the economy explain the Hawley-Smoot Act with this in mind.
In 1930, Congress passed the Hawley-Smoot Tariff Act, which established the highest protective tariff in United States history. It was designed to protect American farmers and manufacturers from foreign competition. Yet it had the opposite effect. By reducing the flow of goods into the United States, the tariff prevented other countries from earning American currency to buy American goods. The tar- iff made unemployment worse in industries that could no longer export goods to Europe. Many countries retaliated by raising their own tariffs. Within a few years, world trade had fallen more than 40 percent. E CAUSES OF THE GREAT DEPRESSION Although histori- ans and economists differ on the main causes of the Great Depression, most cite a common set of factors, among them: • tariffs and war debt policies that cut down the foreign market for American goods • a crisis in the farm sector • the availability of easy credit • an unequal distribution of income These factors led to falling demand for consumer goods, even as newly mechanized factories produced more products. The federal government contributed to the crisis by keeping interest rates low, thereby allowing companies and individuals to borrow easily and build up large debts. Some of this borrowed money was used to buy the stocks that later led to the crash. At first people found it hard to believe that economic disaster had struck. In November 1929, President Hoover encouraged Americans to remain confident about the economy. Yet, the most severe depression in American his- tory was well on its way.
Transcribed Image Text:In 1930, Congress passed the Hawley-Smoot Tariff Act, which established the highest protective tariff in United States history. It was designed to protect American farmers and manufacturers from foreign competition. Yet it had the opposite effect. By reducing the flow of goods into the United States, the tariff prevented other countries from earning American currency to buy American goods. The tar- iff made unemployment worse in industries that could no longer export goods to Europe. Many countries retaliated by raising their own tariffs. Within a few years, world trade had fallen more than 40 percent. E CAUSES OF THE GREAT DEPRESSION Although histori- ans and economists differ on the main causes of the Great Depression, most cite a common set of factors, among them: • tariffs and war debt policies that cut down the foreign market for American goods • a crisis in the farm sector • the availability of easy credit • an unequal distribution of income These factors led to falling demand for consumer goods, even as newly mechanized factories produced more products. The federal government contributed to the crisis by keeping interest rates low, thereby allowing companies and individuals to borrow easily and build up large debts. Some of this borrowed money was used to buy the stocks that later led to the crash. At first people found it hard to believe that economic disaster had struck. In November 1929, President Hoover encouraged Americans to remain confident about the economy. Yet, the most severe depression in American his- tory was well on its way.
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Tariffs refer to the tax imposed by the government on the imported goods. It is ultimately borne by the consumers as it increases the prices of imported goods. 

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