Smoot–Hawley Tariff Act of 1930 & the Great Depression

The Smoot–Hawley Tariff Act of 1930 was an act signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels. The ensuing retaliatory tariffs by U.S. trading partners reduced American exports and imports by more than half and according to some views may have contributed to the severity of the Great Depression.

The stock market topped in 1929 and fell 45 percent in just three months. Then, it had a sharp correction, recovering 47 percent from the November ‘29 low.

In June 1930, two U.S. Congressmen, Smoot and Hawley, championed a bill to slap a tariff on virtually every foreign good. And that was the catalyst for the second leg down ... a massive plunge in the stock market and arguably the catalyst for the Great Depression.

The problem with tariffs is that they tend to bring about retaliation. And that's exactly what happened. It brought global trade to a standstill.

This Day in Wall Street History 1818: Congress ushers in protectionism

On this day in 1818, Congress heeded President James Monroe's call to uphold the fiscal integrity of domestic industry and gave the green light to sharply protectionist tariff legislation.

Not only did the tariff hike duties on iron imports, but it also put the breaks on an anticipated decrease in the levy charged on textiles. Moreover, the tariff legislation marked another chapter in America's long romance with protectionist policies. Indeed, from the time of its birth as a nation, the United States routinely adopted legislation designed to steel its producers' power in the international marketplace.

In the years following the tariff of 1818, America's fondness for tariffs grew especially pronounced; by the 1820s, duties climbed to unprecedented levels. America's proclivity for protectionism faded by the early to mid-20th century, when the Depression and World War II prompted U.S. leaders, including President Franklin Roosevelt, to shift to a more-liberal fiscal course and open the doors to international trade.

Source: History.com