Fordney-McCumber Tariff

Fordney-McCumber Tariff

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One of the first legislative trends of the Sixty-Seventh Congress (1921-23) was the Republican leadership`s marshaling of their overwhelming majorities in both the House and Senate to return the nation’s tariff policy to protectionism. The Emergency Tariff Act of 1921 was designed to be only a temporary measure until a more comprehensive measure could be drafted.Major new tariff legislation was guided through Congress by Representative Joseph W. Fordney of Michigan and Senator Porter J. McCumber of North Dakota, and provided for the following:

  • raising tariff rates to their highest level to that time, exceeding those provided by an earlier Republican Congress in the Payne-Aldrich Tariff (1909);
  • granting to the president broad powers to raise or lower rates by as much as 50 percent on items recommended by the Tariff Commission, a review body created during the Wilson administration;
  • introducing the use of the “American selling price”* as a means to increase the protective nature of the tariff without raising rates further.

As a matter of actual practice, the Republican presidents of the 1920s predictably ignored recommendations to lower tariff rates, but regularly offered protection to American producers by raising rates when given the opportunity.The impact of the Fordney-McCumber Act was considerable. Rising tariff barriers in the U.S. made it more difficult for European nations to conduct trade and, resultantly, to pay off their war debts.Further, the protective shield against foreign competition enabled the growth of monopolies in many American industries. Predictably, other nations resented the American policy, protested without result, and eventually resorted to raising their own tariff rates against American-made goods, thus creating a significant decline in international trade.The Fordney-McCumber Tariff called for a commission to consider reductions in tariffs. Seven years later, Senator William E. Borah of Idaho pronounced the commission a failure:

To my mind the record is one which condemns the Tariff Commission if we are to regard its operations as having anything whatever to do with the question of reducing tariff rates. In that respect it has been as inflexible as one could well conceive any law to be. I take the position that not a single reduction of any moment whatever has been brought about or been recommended by the Tariff Commission; that not 1 cent of the tremendous burden laid upon the consumers of this country by reason of conditions under which the tariff was enacted has been lifted by the action of the Tariff Commission during these seven years ...

*For example, if a set amount of a foreign-produced chemical had a value in its home market of $60 and the U.S. tariff rate for that item was 50 percent, then the total price on the American market would be $90 ($60 + $30). However, that item might be in short supply in the U.S. and could command a market price of $80. Under Fordney-McCumber, the statutory 50 percent rate would be applied to the higher American selling price and result in an overall price of $120 ($80 + 40). The rate remained unchanged, but it would be harder for foreign producers to market their product in the U.S.See other aspects of Harding`s domestic policy.What is a Tariff? Also see tariff table summary.

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