The Underwood Tariff Act, enacted in 1913, represents a significant piece of legislation during Woodrow Wilson’s presidency. This law substantially reduced tariff rates on hundreds of imported goods, aiming to lower consumer prices and promote competition. For example, the average tariff rate was reduced from approximately 40% to around 25%.
The significance of this act lies in its shift away from protectionism and toward free trade. It was intended to benefit American consumers by making imported goods more affordable and to encourage efficiency in American industries by exposing them to greater international competition. The historical context involves a progressive movement push for lower tariffs, viewed as benefiting special interests at the expense of the average citizen. To offset the loss of government revenue due to lower tariffs, the Underwood Tariff also established a graduated income tax, authorized by the 16th Amendment.
