Tariffs Prolonged The Great Depression In U.S.: Analyst

A tariff is a tax on imported goods, usually aimed at protecting local jobs and industries from foreign competition.

The Smoot-Hawley Act sparked a trade war as European nations implemented countermeasures, and historians often blame these tariffs for prolonging the Great Depression. I Photo: U.S. National Archives and Records Administration

The idea is that if foreign materials and products are more expensive, consumers will buy more domestic goods, Robin Hartill, a certified financial planner, wrote for Yahoo Finance.

President Donald Trump has imposed more and higher tariffs, implementing a 20% duty on Chinese imports and 25% tariffs on products from Canada and Mexico. These measures represent a seismic shift in U.S. trade policy, targeting the nation’s three biggest trading partners.

Most countries have tariffs of some sort, and the reasons for imposing them vary widely. Tariffs provide income for the government that levies them.

In fact, tariffs were the primary source of revenue for the U.S. government in its early days until the federal income tax was established in the early 20th century. Today, tariffs are a negligible source of revenue for many developed countries, including the U.S. and European Union (E.U.) nations.

In the U.S., for instance, tariffs accounted for less than 2% of the federal government’s revenue in 2023.

Poorer countries tend to have much higher tariff rates than wealthier nations, as their governments rely on them for revenue. As of 2021, Djibouti, The Gambia, and Belize all had average tariff rates above 17%, compared to just 1.5% for the U.S.

Tariffs are generally protectionist, giving domestic goods a price advantage and shielding local businesses and workers from cheaper foreign competitors. After the 1929 stock market crash, Congress passed sweeping tariff hikes—some as high as 60%—under the Smoot-Hawley Tariff Act to protect the farming industry.

In response, exporting countries imposed retaliatory tariffs on U.S. goods.

The Smoot-Hawley Act sparked a trade war as European nations implemented countermeasures, and historians often blame these tariffs for prolonging the Great Depression, The Associated Press (AP) also reported.