The 1937 Marihuana Tax Actdidn't distinguish between fiber hemp and psychoactive marijuana. Both are Cannabis sativa, so both got swept into a prohibitive tax-stamp regime that made domestic cultivation effectively impossible. The American hemp industry, which had been declining anyway against cheaper imports and synthetics, was finished off within a few years.
World War II briefly reversed it. When Japan cut off Manila hemp imports in 1942, the USDA released the propaganda film Hemp for Victory and paid American farmers to plant hundreds of thousands of acres for rope, parachute webbing, and naval cordage. After the war, those programs ended and prohibition returned.
The popular conspiracy framing, that newspaper magnate William Randolph Hearst (who owned timber holdings) and DuPont (who held synthetic fiber patents) lobbied for prohibition to kill hemp competition, is told as gospel in cannabis circles but is contested by historians. The truth is probably less dramatic and more depressing: a mix of racism in the political rhetoric of the era, regulatory laziness, industry indifference, and synthetic chemistry that genuinely was cheaper. Hemp got crushed not because someone hated it, but because no one with power bothered to defend it.
The 2018 Farm Bill finally re-legalized industrial hemp federally (defined as Cannabis sativa with less than 0.3% THC by dry weight), and US acreage has climbed since, though China and the EU still lead global production by a wide margin, having never stopped.