What did investors fear as a result of the smoot Hawley tariff act

Investors feared that the Smoot-Hawley Tariff Act would lead to a global trade war, as countries around the world raised their own tariffs in response to the increased tariffs imposed by the United States. This would reduce imports and exports, leading to economic stagnation and even recession.

Explanation

The Smoot-Hawley Tariff Act had a significant impact on the US and the global economy. The tariff led to a decrease in international trade, as countries raised their own tariffs in response to the increased tariffs imposed by the US. This decrease in trade led to a decrease in US exports and an increase in the cost of consumer goods.

The decrease in international trade and the resulting economic downturn were contributing factors to the Great Depression. The Great Depression was a period of prolonged economic crisis in the US and around the world, characterized by high unemployment, poverty, and deflation. The Smoot-Hawley Tariff Act and the resulting decrease in international trade likely worsened the effects of the Great Depression.

The importance of the Smoot-Hawley Tariff Act is that it provides a cautionary tale of the dangers of protectionist trade policies. The Smoot-Hawley Tariff Act showed how a single country’s protectionist policies can have a negative effect on the global economy. While some countries still have protectionist policies, the lessons of the Smoot-Hawley Tariff Act have led to more open trade policies and agreements that benefit both countries.