Fordney–McCumber Tariff

The Fordney–McCumber Tariff of 1922 was a law that raised American tariffs on many imported goods to protect factories and farms. The US Congress displayed a pro-business attitude in passing the tariff and in promoting foreign trade through providing huge loans to Europe, which, in turn, bought more US goods.

The Roaring Twenties brought a period of sustained economic prosperity after the Depression of 1920–21.

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, 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 conservative pro-business and pro-farm Republicans in control of both Congress and the White House.

The hearings held by Congress 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 that were charged by American companies. The difference of production costs was calculated by the Tariff Commission.

Another was the American selling price, which 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 that was recommended by the Tariff Commission.

In September 1922, the Fordney–McCumber Tariff bill (named after Joseph Fordney, the chair of the House Ways and Means Committee, and Porter McCumber, the 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% for dutiable imports and an average of 14% overall. The tariff was defensive, rather than offensive. The tariff was determined by the cost of production and the market value.

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