Fordney-McCumber Tariff

The Fordney–McCumber Tariff of 1922 was a law that raised American tariffs on many imported goods in order to protect factories and farms. 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 American goods. The Roaring Twenties brought a period of sustained economic prosperity with an end to the Depression of 1920–21; the prosperity ended in late 1929, and the tariff was revised in 1930.

The first sector of the economy that was hit by a fall in post-war demand was agriculture. 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. Farmers borrowed heavily to expand their acreage; they had difficulty paying back the loans when prices fell. 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 conservative pro-business and pro-farm Republicans in control of Congress and the White House.

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.

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