Fordney-McCumber Tariff
Encyclopedia
The Fordney–McCumber Tariff of 1922 raised American tariffs in order to protect factories and farms. Congress displayed a pro-business attitude in passing the ad valorem tariff and in promoting foreign trade through providing huge loans to Europe, which in turn bought more American goods. The Roaring Twenties
brought a period of sustained economic prosperity with an end to the Depression of 1920–21.
As a result of the war, Americans had two main concerns. First, they wanted to ensure economic self-sufficiency so that no future enemy could manipulate the American economy. Second, many industries wanted to preserve the benefits of the increased wartime demand.
. During World War I, the American agricultural industry enjoyed prosperity, through the raising of prices which led to increased output which Americans used to supply Europe. Some of the post war problems for the American agriculture come from the great surplus of farm goods that could not be absorbed in the national market, because European countries had recovered sufficiently from the war, and their markets no longer required 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 Republicans in control of Congress and the White House. Special interests began to petition an amenable Congress for trade protection.
The hearings held by Congress led to the creation of several new tools of protection. The first was the scientific tariff. The purpose of the scientific tariff was to equalize production costs among countries so that no country could undercut the prices charged by American companies. The difference of production costs was calculated by the Tariff Commission.
A second novelty was the American Selling Price. This allowed the president to calculate the duty 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 it was recommended by the Tariff Commission.
In September 1922, the Fordney–McCumber Tariff bill (named after Joseph Fordney, chair of the House Ways and Means Committee, and Porter McCumber, chair of the Senate Finance Committee) was signed by President Warren Harding. In the end, the tariff law raised the American ad valorem tariff rate to an average of about 38.5 percent for dutiable imports and an average of 14% overall. The measure was defensive tariff rather than an offensive. An ad valorem tariff was determined by the cost of production and market value.
brought a sustained period of economic prosperity principally to North America, but also to London, Berlin and Paris, with the end of the Depression of 1920-21 in the U.S. and a robust American economy. For agriculture, the tariff raised the purchasing power of the farmers by two to three percent, with other industries raising the price of some farm equipment. In September 1926, economic statistics were released by farming groups that revealed the rising cost of farm machinery. For example, the average cost of an harness rose from $46 in 1918 to $75 in 1926, the 14-inch plow doubled in cost from $14 to $28, mowing machines went from $45 to $95, and farm wagons from $85 to $150.
said, "Our foreign markets depend both on the efficiency of our production and the tariffs of countries in which we would sell. Our own [high] tariffs 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 automobile
s from 45% to 100%, Spain
raised tariffs on American goods by 40%, and Germany
and Italy
raised tariffs on wheat.
In 1928, Henry Ford attacked the Fordney–McCumber Tariff, arguing that the American automobile industry did not need protection since it dominated the domestic market, and their interest is in expending foreign sales.
Some farmers opposed the Fordney- McCumber Tariff, blaming 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 Walsh challenged the tariff by arguing that the farmer is the net exporter and does not need protection because they depend on foreigner markets to sell their surplus. The Senator pointed out that during the first year of the tariff the cost of living climbed higher than any other year except during the war, presenting a survey of the Department of Labor, in which all of 32 cities 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 raised by 5.5% in Buffalo, New York, and 10.2% in Chicago. Republican Frank W. Murphy, head of the Minnesota Farm Bureau, also claimed that the problem was not in the world price of farm products, but in the things farmers had to buy. Republican Congressman W. R. Green, chairman of the House Ways and Means Committee, acknowledged that the statistics of the Bureau of Research of the American Farm Bureau that showed farmers had lost more than $300 million annually as a result of the tariff.
Roaring Twenties
The Roaring Twenties is a phrase used to describe the 1920s, principally in North America, but also in London, Berlin and Paris for a period of sustained economic prosperity. The phrase was meant to emphasize the period's social, artistic, and cultural dynamism...
brought a period of sustained economic prosperity with an end to the Depression of 1920–21.
As a result of the war, Americans had two main concerns. First, they wanted to ensure economic self-sufficiency so that no future enemy could manipulate the American economy. Second, many industries wanted to preserve the benefits of the increased wartime demand.
Background
The first sector of the economy that was hit by a fall in post-war demand was agricultureAgriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
. During World War I, the American agricultural industry enjoyed prosperity, through the raising of prices which led to increased output which Americans used to supply Europe. Some of the post war problems for the American agriculture come from the great surplus of farm goods that could not be absorbed in the national market, because European countries had recovered sufficiently from the war, and their markets no longer required 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
United States House election, 1920
The U.S. House election, 1920 was an election for the United States House of Representatives in 1920 which coincided with the election of President Warren G. Harding....
put the Republicans in control of Congress and the White House. Special interests began to petition an amenable Congress for trade protection.
The hearings held by Congress led to the creation of several new tools of protection. The first was the scientific tariff. The purpose of the scientific tariff was to equalize production costs among countries so that no country could undercut the prices charged by American companies. The difference of production costs was calculated by the Tariff Commission.
A second novelty was the American Selling Price. This allowed the president to calculate the duty 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 it was recommended by the Tariff Commission.
In September 1922, the Fordney–McCumber Tariff bill (named after Joseph Fordney, chair of the House Ways and Means Committee, and Porter McCumber, chair of the Senate Finance Committee) was signed by President Warren Harding. In the end, the tariff law raised the American ad valorem tariff rate to an average of about 38.5 percent for dutiable imports and an average of 14% overall. The measure was defensive tariff rather than an offensive. An ad valorem tariff was determined by the cost of production and market value.
Economic effects
The Roaring TwentiesRoaring Twenties
The Roaring Twenties is a phrase used to describe the 1920s, principally in North America, but also in London, Berlin and Paris for a period of sustained economic prosperity. The phrase was meant to emphasize the period's social, artistic, and cultural dynamism...
brought a sustained period of economic prosperity principally to North America, but also to London, Berlin and Paris, with the end of the Depression of 1920-21 in the U.S. and a robust American economy. For agriculture, the tariff raised the purchasing power of the farmers by two to three percent, with other industries raising the price of some farm equipment. In September 1926, economic statistics were released by farming groups that revealed the rising cost of farm machinery. For example, the average cost of an harness rose from $46 in 1918 to $75 in 1926, the 14-inch plow doubled in cost from $14 to $28, mowing machines went from $45 to $95, and farm wagons from $85 to $150.
Reaction
The tariff was supported by the Republican party and conservatives and was generally opposed by the Democratic Party and liberal progressives. One intent of the tariff was to help those returning from World War I have greater job opportunities. Trading partners complained immediately. European nations affected by World War I sought access for their exports to the American market to make payments to the U.S. for war loans. Democratic Representative Cordell HullCordell Hull
Cordell Hull was an American politician from the U.S. state of Tennessee. He is best known as the longest-serving Secretary of State, holding the position for 11 years in the administration of President Franklin Delano Roosevelt during much of World War II...
said, "Our foreign markets depend both on the efficiency of our production and the tariffs of countries in which we would sell. Our own [high] tariffs 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
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
raised its tariffs on automobile
Automobile
An automobile, autocar, motor car or car is a wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor...
s from 45% to 100%, Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
raised tariffs on American goods by 40%, and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
raised tariffs on wheat.
In 1928, Henry Ford attacked the Fordney–McCumber Tariff, arguing that the American automobile industry did not need protection since it dominated the domestic market, and their interest is in expending foreign sales.
Some farmers opposed the Fordney- McCumber Tariff, blaming 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 Walsh challenged the tariff by arguing that the farmer is the net exporter and does not need protection because they depend on foreigner markets to sell their surplus. The Senator pointed out that during the first year of the tariff the cost of living climbed higher than any other year except during the war, presenting a survey of the Department of Labor, in which all of 32 cities 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 raised by 5.5% in Buffalo, New York, and 10.2% in Chicago. Republican Frank W. Murphy, head of the Minnesota Farm Bureau, also claimed that the problem was not in the world price of farm products, but in the things farmers had to buy. Republican Congressman W. R. Green, chairman of the House Ways and Means Committee, acknowledged that the statistics of the Bureau of Research of the American Farm Bureau that showed farmers had lost more than $300 million annually as a result of the tariff.
See also
- Underwood Tariff of 1913
- Emergency Tariff of 1921Emergency Tariff of 1921The Emergency Tariff of 1921 of the United States was enacted on May 27, 1921. Due to the Underwood Tariff passed during the Wilson Administration, Republican leaders in the United States Congress rushed to create a temporary measure to ease the plight of farmers until a better solution could be...
- Smoot-Hawley Tariff ActSmoot-Hawley Tariff ActThe Tariff Act of 1930, otherwise known as the Smoot–Hawley Tariff was an act, sponsored by United States Senator Reed Smoot and Representative Willis C. Hawley, and signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels.The overall level tariffs...
of 1930 - Reciprocal Act of 1934
- International tradeInternational tradeInternational trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
- ProtectionismProtectionismProtectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
External links
- Fordney-McCumber Tariff (EH.Net Encyclopedia of Economic History)