Fordney–McCumber Tariff
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The Fordney–McCumber Tariff of 1922 was a law that raised American
tariff A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
s on many imported goods to protect factories and farms. The
US Congress The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washingto ...
displayed a pro-business attitude in passing the tariff and in promoting foreign trade by providing huge loans to Europe. That, in turn, bought more US goods. However, five years after the passage of the tariff, American trading partners had raised their own tariffs by a significant degree. France raised its tariffs on automobiles from 45% to 100%, Spain raised its tariffs on American goods by 40%, and Germany and Italy raised their tariffs on wheat. According to the American Farm Bureau, farmers lost more than $300 million annually as a result of the tariff.


Background

The first sector of the economy that was hit by a fall in postwar demand was agriculture. During World War I, the American agricultural industry had enjoyed prosperity through the raising of prices, which led to increased output that Americans used to supply Europe. Farmers borrowed heavily to expand their acreage and had difficulty paying back the loans when prices fell. Some of the postwar problems for American agriculture come from the great surplus of farm goods, which could not be absorbed in the national market as European countries had recovered sufficiently from the war, with their markets no longer requiring large quantities of American agricultural products. Gross farm income in 1919 amounted to $17.7 billion. By 1921, exports to Europe had plummeted, and farm income fell to $10.5 billion. Other sectors of the economy wanted to avoid a similar fate. The 1920 election put the conservative pro-business and pro-farm Republicans in control of both Congress and the White House. Hearings were held by Congress and led to the creation of several new tools of protection. One was the scientific tariff to equalize production costs among countries; no country could undercut the prices charged by American companies. The difference of production costs was calculated by the
Tariff Commission The Tariff Commission was established in the United Kingdom in December 1903 by Joseph Chamberlain. The Commission was set up under the auspices of the Tariff Reform League. William Hewins the economist and first director of the London School of Ec ...
. Another was the American selling price; it allowed the President to calculate the duty, which was based on the price of the American price of a good, not the imported good. The bill also gave the President the power to raise or lower rates on products if that was recommended by the Tariff Commission. In September 1922, the Fordney–McCumber Tariff bill (named after
Joseph Fordney Joseph Warren Fordney (November 5, 1853 – January 8, 1932) was an American Republican politician from Saginaw, Michigan. He represented Saginaw County and the surrounding area of Central Michigan in the U.S. House of Representatives for twenty-f ...
, the chair of the
House Ways and Means Committee The Committee on Ways and Means is the chief tax-writing committee of the United States House of Representatives. The committee has jurisdiction over all taxation, tariffs, and other revenue-raising measures, as well as a number of other program ...
, and
Porter McCumber Porter James McCumber (February 3, 1858May 18, 1933) was a United States senator from North Dakota. He was a supporter of the 1906 "Pure Food and Drug Act", and of the League of Nations. Early life Born in Crete, Illinois in 1858, he moved with ...
, the chair of the
Senate Finance Committee The United States Senate Committee on Finance (or, less formally, Senate Finance Committee) is a standing committee of the United States Senate. The Committee concerns itself with matters relating to taxation and other revenue measures generall ...
) was signed by President
Warren Harding Warren Gamaliel Harding (November 2, 1865 – August 2, 1923) was the 29th president of the United States, serving from 1921 until his death in 1923. A member of the Republican Party, he was one of the most popular sitting U.S. presidents. ...
. In the end, the tariff law raised the American
ad valorem An ''ad valorem'' tax (Latin for "according to value") is a tax whose amount is based on the value of a transaction or of property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax (VAT). An ...
tariff rate to an average of about 38.5% for dutiable imports and an average of 14% overall. The tariff was defensive, rather than offensive, as it was determined by the cost of production and the market value.


Economic effects

For agriculture, the tariff raised the purchasing power of the farmers by 2–3%, but other industries raised the price of some farm equipment. In September 1926, economic statistics released by farming groups revealed the rising cost of farm machinery. For example, the average cost of a harness rose from $46 in 1918 to $75 in 1926, the 14-inch plow rose from $14 to $28, mowing machines rose from $45 to $95, and farm wagons rose from $85 to $150. That triggered a
tariff war A trade war is an economic conflict often resulting from extreme protectionism in which states raise or create tariffs or other trade barriers against each other in response to trade barriers created by the other party. If tariffs are the exclus ...
against other European countries that traded with the United States. As US tariffs raised, those in other countries followed. According to the American Farm Bureau, farmers lost more than $300 million annually as a result of the tariff.


Reactions

The tariff was supported by the Republican Party and conservatives and was generally opposed by the Democratic Party, liberals, and progressives. One purpose of the tariff was to help those returning from World War I have greater job opportunities. Trading partners complained immediately. European nations affected by the war sought access for their exports to the American market to make payments to the war loans from America. Democratic Representative
Cordell Hull Cordell Hull (October 2, 1871July 23, 1955) was an American politician from Tennessee and the longest-serving U.S. Secretary of State, holding the position for 11 years (1933–1944) in the administration of President Franklin Delano Roosevelt ...
warned, "Our foreign markets depend both on the efficiency of our production and the tariffs of countries in which we would sell. Our own ightariffs are an important factor in each. They injure the former and invite the latter." Five years after the passage of the tariff, American trading partners had raised their own tariffs by a significant degree. France raised its tariffs on automobiles from 45% to 100%, Spain raised its tariffs on American goods by 40%, and Germany and Italy raised their tariffs on wheat. In 1928,
Henry Ford Henry Ford (July 30, 1863 – April 7, 1947) was an American industrialist, business magnate, founder of the Ford Motor Company, and chief developer of the assembly line technique of mass production. By creating the first automobile that mi ...
attacked the tariff and argued that the American automobile industry did not need protection since it dominated the domestic market. Its main interest was now to expand foreign sales.Kaplan, Edward S. ''American Trade Policy, 1923–1995'', 1996, p. 13 Some farmers opposed the tariff and blamed it for the agricultural depression. The American Farm Bureau Federation claimed that because of the tariff, the raised price of raw wool cost to farmers $27 million. Democratic Senator David I. Walsh challenged the tariff by arguing that the farmers were net exporters and so did not need protection. They depended on foreign markets to sell their surplus. Walsh pointed out that during the first year of the tariff, the cost of living climbed higher than any other year except during the war. He presented a survey of the Department of Labor in which all of the 32 cities that were assessed had seen an increase in the cost of living. For example, the food costs increased 16.5% in Chicago and 9.4% in New York. Clothing prices rose by 5.5% in Buffalo and 10.2% in Chicago. Republican Frank W. Murphy, the head of the Minnesota Farm Bureau, also claimed that the problem was not in the world price of farm products but in the things that farmers had to buy.


See also

*
Underwood Tariff The Revenue Act of 1913, also known as the Underwood Tariff or the Underwood-Simmons Act (ch. 16, ), re-established a federal income tax in the United States and substantially lowered tariff rates. The act was sponsored by Representative Oscar Un ...
of 1913 *
Emergency Tariff of 1921 An emergency is an urgent, unexpected, and usually dangerous situation that poses an immediate risk to health, life, property, or environment and requires immediate action. Most emergencies require urgent intervention to prevent a worsening ...
*
Smoot–Hawley Tariff Act The Tariff Act of 1930 (codified at ), commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, was a law that implemented protectionist trade policies in the United States. Sponsored by Senator Reed Smoot and Representative Willis ...
of 1930 *
Reciprocal Tariff Act The Reciprocal Tariff Act (enacted June 12, 1934, ch. 474, , ) provided for the negotiation of tariff agreements between the United States and separate nations, particularly Latin American countries. The Act served as an institutional reform inte ...
of 1934 *
International trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...
*
Protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. ...


References


Sources

* * * * Kaplan, Edward S. and Thomas W. Ryley (1994). ''Prelude to Trade Wars: American Tariff Policy, 1890–1922'', the standard scholarly histor
online
* * *


External links

*Kaplan, Edward S
The Fordney–McCumber Tariff of 1922
(''Encyclopedia of Economic History'') {{DEFAULTSORT:Fordney-Mccumber Tariff 1922 in law 1922 in the United States United States federal trade legislation 1922 in international relations 1922 in economics