In your own words explain the International Trade and Tariffs theory. Theory #4: International Trade and Protective

 In your own words explain the International Trade and Tariffs theory.

Transcribed Image Text:

Theory #4: International Trade and Protective Tariffs Caused the Great Depression Although America prospered greatly during the period following World War I, this economic boom depended largely on factors and events outside the borders of the United States. Following the war, European demand for American manufactured goods and agricultural products was at an all-time high, given that much of Europe was literally destroyed in the war itself. As goods produced in the U.S. were shipped across the Atlantic, the American economy was flooded with money coming from European consumers. This state of things began to change in the late 1920s, as European demand for American goods began to decline. This was partly because European industry and agriculture were becoming more productive and partly because some European nations were having financial difficulties of their own. Europe's financial troubles were due largely to the international debt structure created after the war, which created a system where Britain and France would pay back their wartime debt to the United States with the reparation payments they received from Germany and Austria, who were forced to pay the Allies back for starting the war. When Germany and Austria failed to pay Britain and France, these countries in turn defaulted on [failed to pay) their loans to the United States, leading to a general financial crisis. To make matters worse, in 1930 President Herbert Hoover passed the Smoot-Hawley Tariff, which placed a tax on foreign-made goods entering the United States. This caused America's European trading partners to pass similar protective tariffs, and soon the amount of goods being traded between countries sharply declined. As glob demand for American products dried up, manufacturers like the Ford Motor Company in Michigan were forced to fire workers in order to cut costs, leading to a process that eventually crashed the American economy. Theory #4: International Trade and Protective Tariffs Caused the Great Depression Although America prospered greatly during the period following World War I, this economic boom depended largely on factors and events outside the borders of the United States. Following the war, European demand for American manufactured goods and agricultural products was at an all-time high, given that much of Europe was literally destroyed in the war itself. As goods produced in the U.S. were shipped across the Atlantic, the American economy was flooded with money coming from European consumers. This state of things began to change in the late 1920s, as European demand for American goods began to decline. This was partly because European industry and agriculture were becoming more productive and partly because some European nations were having financial difficulties of their own. Europe's financial troubles were due largely to the international debt structure created after the war, which created a system where Britain and France would pay back their wartime debt to the United States with the reparation payments they received from Germany and Austria, who were forced to pay the Allies back for starting the war. When Germany and Austria failed to pay Britain and France, these countries in turn defaulted on [failed to pay) their loans to the United States, leading to a general financial crisis. To make matters worse, in 1930 President Herbert Hoover passed the Smoot-Hawley Tariff, which placed a tax on foreign-made goods entering the United States. This caused America's European trading partners to pass similar protective tariffs, and soon the amount of goods being traded between countries sharply declined. As glob demand for American products dried up, manufacturers like the Ford Motor Company in Michigan were forced to fire workers in order to cut costs, leading to a process that eventually crashed the American economy.

Answer rating: 100% (QA)

Tariffs are the taxes imposed on imported goods to make them more expensive then they would otherwis... View the full answer