Question

How did tariffs affect international trade in the late 1920s?

Answer 1

Tariffs in the late 1920's resulted from slumping domestic sales of products, namely in the United States where too much had been purchased on credit and overproduction was widespread.

In order for countries to try and increase their economy, keep domestic products protected and people employed, tariffs put a heavy tax on incoming products from around the world. It started largely in the United States, and rapidly other countries developed a policy of high tariffs. International trade slumped overall and countries lacking products domestically could scarcely afford to import from other nations. Canadian farmers for example couldn't afford heavy farm equipment made in Canada, but tariffs made it so that they could not afford to purchase equipment made in the US or elsewhere either.

It was one of the major reasons the Great Depression was as severe as it was. When countries don't trade with one another, economies come to a grinding hault. Because of tariffs in the 20's and the impact they had, after WWII the IMF or International Monetary Fund was established. Amongst other things, it loans money to nations that are struggling domestically. The stipulation for giving countries this money is that they don't introduce high tariffs to protect their own products - this is to protect international trade into the future. Their success has sometimes been limited, but economists to this day recognize the impact tariffs in the 1920's had.