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Tariffs have historically served a key role in the
trade policy of the United States Foreign trade of the United States comprises the international imports and exports of the United States. The country is among the top three global importers and exporters. The regulation of trade is constitutionally vested in the United ...
. Their purpose was to generate revenue for the federal government and to allow for import substitution industrialization (industrialization of a nation by replacing foreign imports with domestic production) by acting as a protective barrier around infant industries. They also aimed to reduce the trade deficit and the pressure of foreign competition. Tariffs were one of the pillars of the American System that allowed the rapid development and industrialization of the United States. The United States pursued a protectionist policy from the beginning of the 19th century until the middle of the 20th century. Between 1861 and 1933, they had one of the highest average tariff rates on manufactured imports in the world. However American agricultural and industrial were cheaper than rival products and the tariff had an impact primarily on wool products. After 1942 the U.S. promoted worldwide free trade. According to Dartmouth economist Douglas Irwin, tariffs have serve three primary purposes: "to raise revenue for the government, to restrict imports and protect domestic producers from foreign competition, and to reach reciprocity agreements that reduce trade barriers." From 1790 to 1860, average tariffs increased from 20 percent to 60 percent before declining again to 20 percent. From 1861 to 1933, which Irwin characterizes as the "restriction period", the average tariffs increased to 50 percent and remained at that level for several decades. From 1934 onwards, which Irwin characterizes as the "reciprocity period", the average tariff declined substantially until it leveled off at 5 percent.


Tariff revenues

Tariffs were the greatest (approaching 95% at times) source of federal revenue until the federal income tax began after 1913. For well over a century the federal government was largely financed by tariffs averaging about 20% on foreign imports. At the end of the
American Civil War The American Civil War (April 12, 1861 – May 26, 1865; also known by other names) was a civil war in the United States. It was fought between the Union ("the North") and the Confederacy ("the South"), the latter formed by state ...
in 1865 about 63% of Federal income was generated by the excise taxes, which exceeded the 25.4% generated by tariffs. In 1915 during World War I tariffs generated only 30.1% of revenues. Since 1935 tariff income has continued to be a declining percentage of Federal tax income.


Historical trends

After the United States achieved independence in 1783, under the
Articles of Confederation The Articles of Confederation and Perpetual Union was an agreement among the 13 Colonies of the United States of America that served as its first frame of government. It was approved after much debate (between July 1776 and November 1777) by ...
, the U.S. federal government, could not collect taxes directly but had to "request" money from each state—an almost fatal flaw for a federal government. Lack of ability to tax directly was one of several major flaws in the Articles of Confederation. The ability to tax directly was addressed in the drafting of the United States Constitution in May to September 1787
Constitutional Convention (United States) The Constitutional Convention took place in Philadelphia from May 25 to September 17, 1787. Although the convention was intended to revise the league of states and first system of government under the Articles of Confederation, the intention fr ...
in
Philadelphia Philadelphia, often called Philly, is the largest city in the Commonwealth of Pennsylvania, the sixth-largest city in the U.S., the second-largest city in both the Northeast megalopolis and Mid-Atlantic regions after New York City. Sinc ...
. It came into effect in 1789. It specified that the
United States House of Representatives The United States House of Representatives, often referred to as the House of Representatives, the U.S. House, or simply the House, is the lower chamber of the United States Congress, with the Senate being the upper chamber. Together the ...
has to originate all tax and tariff laws. The new government needed a way to collect taxes from all the states that were easy to enforce and had only a nominal cost to the average citizen. They had just finished a war on "Taxation without Representation". The
Tariff of 1789 The Tariff Act of 1789 was the first major piece of legislation passed in the United States after the ratification of the United States Constitution and it had two purposes. It was to protect manufacturing industries developing in the nation and ...
was the second bill signed by President George Washington imposing a tariff of about 5% on nearly all imports, with a few exceptions. In 1790 the
United States Revenue Cutter Service ) , colors= , colors_label= , march= , mascot= , equipment= , equipment_label= , battles= , anniversaries=4 August , decorations= , battle_honours= , battle_honours_label= , disbanded=28 January 1915 , flying_hours= , website= , commander1= , co ...
was established to primarily enforce and collect the import tariffs. This service later became the
United States Coast Guard The United States Coast Guard (USCG) is the maritime security, search and rescue, and law enforcement service branch of the United States Armed Forces and one of the country's eight uniformed services. The service is a maritime, military, mu ...
. Many American intellectuals and politicians during the country's catching-up period felt that the free trade theory advocated by British classical economists was not suited to their country. They argued that the country should develop manufacturing industries and use government protection and subsidies for this purpose, as Britain had done before them. Many of the great American economists of the time, until the last quarter of the 19th century, were strong advocates of industrial protection: Daniel Raymond who influenced Friedrich List,
Mathew Carey Mathew Carey (January 28, 1760 – September 16, 1839) was an Irish-born American publisher and economist who lived and worked in Philadelphia, Pennsylvania. He was the father of economist Henry Charles Carey. Early life and education Care ...
and his son Henry, who was one of Lincoln's economic advisers. The intellectual leader of this movement was Alexander Hamilton, the first Secretary of the Treasury of the United States (1789-1795). Thus, it was against
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist. He was one of the most influential of the classical economists along with Thomas Malthus, Adam Smith and James Mill. Ricardo was also a politician, an ...
's theory of comparative advantage that the United States protected its industry. They pursued a protectionist policy from the beginning of the 19th century until the middle of the 20th century, after the Second World War. In Report on Manufactures which is considered the first text to express modern protectionist theory, Alexander Hamilton argued that if a country wished to develop a new activity on its soil, it would have to temporarily protect it. According to him, this protection against foreign producers could take the form of import duties or, in rare cases, prohibition of imports. He called for customs barriers to allow American industrial development and to help protect infant industries, including bounties (subsidies) derived in part from those tariffs. He also believed that duties on raw materials should be generally low. Hamilton argued that despite an initial "increase of price" caused by regulations that control foreign competition, once a "domestic manufacture has attained to perfection… it invariably becomes cheaper". Alexander Hamilton and Daniel Raymond were among the first theorists to present the infant industry argument. Hamilton was the first to use the term "infant industries" and to introduce it to the forefront of economic thinking. He believed that political independence was predicated upon economic independence. Increasing the domestic supply of manufactured goods, particularly war materials, was seen as an issue of national security. And he feared that Britain's policy towards the colonies would condemn the United States to be only producers of agricultural products and raw materials. Britain initially did not want to industrialize the American colonies, and implemented policies to that effect (for example, banning high value-added manufacturing activities). Under British rule, America was denied the use of tariffs to protect its new industries. Thus, the American Revolution was, to some extent, a war against this policy, in which the commercial elite of the colonies rebelled against being forced to play a lesser role in the emerging Atlantic economy. This explains why, after independence, the Tariff Act of 1789 was the second bill of the Republic signed by President Washington allowing Congress to impose a fixed tariff of 5% on all imports, with a few exceptions The Congress passed a tariff act (1789), imposing a 5% flat rate tariff on all imports. Between 1792 and the war with Britain in 1812, the average tariff level remained around 12.5%. In 1812 all tariffs were doubled to an average of 25% in order to cope with the increase in public expenditure due to the war. A significant shift in policy occurred in 1816, when a new law was introduced to keep the tariff level close to the wartime level—especially protected were cotton, woolen, and iron goods. The American industrial interests that had blossomed because of the tariff lobbied to keep it, and had it raised to 35 percent in 1816. The public approved, and by 1820, America's average tariff was up to 40 percent. In the 19th century, statesmen such as Senator
Henry Clay Henry Clay Sr. (April 12, 1777June 29, 1852) was an American attorney and statesman who represented Kentucky in both the U.S. Senate and House of Representatives. He was the seventh House speaker as well as the ninth secretary of state, ...
continued Hamilton's themes within the Whig Party under the name " American System which consisted of protecting industries and developing infrastructure in explicit opposition to the "British system" of free trade. The American Civil War (1861-1865) was partially fought over the issue of tariffs. The agrarian interests of the South were opposed to any protection, while the manufacturing interests of the North wanted to maintain it. The fledgling
Republican Party Republican Party is a name used by many political parties around the world, though the term most commonly refers to the United States' Republican Party. Republican Party may also refer to: Africa *Republican Party (Liberia) * Republican Part ...
led by
Abraham Lincoln Abraham Lincoln ( ; February 12, 1809 – April 15, 1865) was an American lawyer, politician, and statesman who served as the 16th president of the United States from 1861 until his assassination in 1865. Lincoln led the nation thro ...
, who called himself a "Henry Clay tariff Whig", strongly opposed free trade. Early in his political career, Lincoln was a member of the protectionist Whig Party and a supporter of Henry Clay. In 1847, he declared: ''"Give us a protective tariff, and we shall have the greatest nation on earth"''. He implemented a 44-percent tariff during the
Civil War A civil war or intrastate war is a war between organized groups within the same state (or country). The aim of one side may be to take control of the country or a region, to achieve independence for a region, or to change government polic ...
—in part to pay for railroad subsidies and for the war effort, and to protect favored industries. Tariffs remained at this level even after the war, thus the victory of the North in the Civil War ensured that the United States remained one of the greatest practitioners of tariff protection for industry. From 1871 to 1913, "the average U.S. tariff on dutiable imports never fell below 38 percent ndgross national product (GNP) grew 4.3 percent annually, twice the pace in free trade Britain and well above the U.S. average in the 20th century," notes
Alfred Eckes Jr Alfred may refer to: Arts and entertainment *''Alfred J. Kwak'', Dutch-German-Japanese anime television series * ''Alfred'' (Arne opera), a 1740 masque by Thomas Arne * ''Alfred'' (Dvořák), an 1870 opera by Antonín Dvořák *"Alfred (Interlu ...
, chairman of the U.S. International Trade Commission under President Reagan. In 1896, the GOP pledged platform pledged to "renew and emphasize our allegiance to the policy of protection, as the bulwark of American industrial independence, and the foundation of development and prosperity. This true American policy taxes foreign products and encourages home industry. It puts the burden of revenue on foreign goods; it secures the American market for the American producer. It upholds the American standard of wages for the American workingman". In 1913, following the electoral victory of the Democrats in 1912, there was a significant reduction in the average tariff on manufactured goods from 44% to 25%. However, the First World War rendered this bill ineffective, and new "emergency" tariff legislation was introduced in 1922, after the Republicans returned to power in 1921. According to Ha-Joon Chang, the United States, while being protectionist, was the fastest growing economy in the world throughout the 19th century and into the 1920s. It was only after the Second World War that the U.S. liberalized its trade (although not as unequivocally as Britain did in the mid-nineteenth century).


Colonial Era to 1789

In the colonial era, before 1775, nearly every colony levied its own tariffs, usually with lower rates for British products. There were taxes on ships (on a tonnage basis), import taxes on slaves, export taxes on tobacco, and import taxes on alcoholic beverages. The London government insisted on a policy of mercantilism whereby only British ships could trade in the colonies. In defiance, some American merchants engaged in smuggling. During the Revolution, the British blockade from 1775 to 1783 largely ended foreign trade. In the 1783–89 Confederation Period, each state set up its own trade rules, often imposing tariffs or restrictions on neighboring states. The new Constitution, which went into effect in 1789, banned interstate tariffs or trade restrictions, as well as state taxes on exports.


Early National period, 1789–1828

The framers of the United States Constitution gave the federal government authority to tax, stating that Congress has the power to "...lay and collect taxes, duties, imposts and excises, pay the debts and provide for the common defense and general welfare of the United States." and also "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Tariffs between states is prohibited by the U.S. Constitution, and all domestically made products can be imported or shipped to another state tax-free. Responding to an urgent need for revenue and a trade imbalance with England that was fast destroying the infant American industries and draining the nation of its currency, the First United States Congress passed, and President George Washington signed, the Hamilton
Tariff of 1789 The Tariff Act of 1789 was the first major piece of legislation passed in the United States after the ratification of the United States Constitution and it had two purposes. It was to protect manufacturing industries developing in the nation and ...
, which authorized the collection of duties on imported goods. Customs duties as set by tariff rates up to 1860 were usually about 80–95% of all federal revenue. Having just fought a war over taxation (among other things) the U.S. Congress wanted a reliable source of income that was relatively unobtrusive and easy to collect. It also sought to protect the infant industries that had developed during the war but which were now threatened by cheaper imports, especially from England. Tariffs and excise taxes were authorized by the United States Constitution and recommended by the first
United States Secretary of the Treasury The United States secretary of the treasury is the head of the United States Department of the Treasury, and is the chief financial officer of the federal government of the United States. The secretary of the treasury serves as the principal ...
, Alexander Hamilton in 1789 to tax foreign imports and set up low excise taxes on whiskey and a few other products to provide the Federal Government with enough money to pay its operating expenses and to redeem at full value U.S. Federal debts and the debts the states had accumulated during the Revolutionary War. The Congress set low excise taxes on only a few goods, such as,
whiskey Whisky or whiskey is a type of distilled alcoholic beverage made from fermented grain mash. Various grains (which may be malted) are used for different varieties, including barley, corn, rye, and wheat. Whisky is typically aged in wooden c ...
, rum,
tobacco Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ch ...
, snuff and refined sugar. The tax on whiskey was highly controversial and set off massive protests by Western Farmers in the Whiskey Rebellion of 1794, which was suppressed by General Washington at the head of an army. The whiskey excise tax collected so little and was so despised it was abolished by President
Thomas Jefferson Thomas Jefferson (April 13, 1743 – July 4, 1826) was an American statesman, diplomat, lawyer, architect, philosopher, and Founding Father who served as the third president of the United States from 1801 to 1809. He was previously the nati ...
in 1802. All tariffs were on a long list of goods (dutiable goods) with different customs rates and some goods on a "free" list. Books and publications were nearly always on the free list. Congress spent enormous amounts of time figuring out these tariff import tax schedules. With tariffs providing the basic federal revenue, an embargo on trade, or an enemy blockade, would threaten havoc. This happened in connection with the American economic warfare against Britain in the 1807–15 period. In 1807 imports dropped by more than half and some products became much more expensive or unobtainable. Congress passed the
Embargo Act of 1807 The Embargo Act of 1807 was a general trade embargo on all foreign nations that was enacted by the United States Congress. As a successor or replacement law for the 1806 Non-importation Act and passed as the Napoleonic Wars continued, it re ...
and the Non-Intercourse Act (1809) to punish British and French governments for their actions; unfortunately their main effect was to reduce imports even more. The
War of 1812 The War of 1812 (18 June 1812 – 17 February 1815) was fought by the United States of America and its indigenous allies against the United Kingdom and its allies in British North America, with limited participation by Spain in Florida. It ...
brought a similar set of problems as U.S. trade was again restricted by British naval blockades. The fiscal crisis was made much worse by the abolition of the First Bank of the U.S., which was the national bank. It was reestablished right after the war. The lack of imported goods relatively quickly gave very strong incentives to start building several U.S. industries in the Northeast. Textiles and machinery manufacturing plants especially grew. Many new industries were set up and run profitably during the wars and about half of them failed after hostilities ceased and normal import competition resumed. Industry in the U.S. was advancing up the skill set, innovation knowledge and organization curve as they adapted to the Industrial Revolution's new machines and techniques. The Tariff Act of 1789 imposed the first national source of revenue for the newly formed United States. The new U.S. Constitution ratified in 1789, allowed only the federal government to levy uniform tariffs. Only the federal government could set tariff rates (customs), so the old system of separate state rates disappeared. The new law taxed all imports at rates from 5 to 15 percent. These rates were primarily designed to generate revenue to pay the annual expenses of the federal government and the national debt and the debts the states had accumulated during the American War of Independence and to also promote manufactures and independence from foreign nations, especially for defense needs. Hamilton believed that all Revolutionary War debt should be paid in full to establish and keep U.S. financial credibility. In addition to income in his Report on Manufactures Treasury Secretary Alexander Hamilton proposed a far-reaching plan to use protective tariffs as a lever for rapid industrialization. In the late 18th century the industrial age was just starting and the United States had little or no textile industry—the heart of the early Industrial Revolution. The British government having just lost the Revolutionary War tried to maintain their near monopoly on cheap and efficient textile manufacturing by prohibiting the export of textile machines, machine models or the emigration of people familiar with these machines. Clothing in the early United States was nearly all hand made by a very time consuming and expensive process—just like it had been made for centuries before. The new textile manufacturing techniques in Britain were often over thirty times cheaper as well as being easier to use, more efficient and productive. Hamilton believed that a stiff tariff on imports would not only raise income but "protect" and help subsidize early efforts at setting up manufacturing facilities that could compete with British products. Samuel Slater in 1789 emigrated (illegally since he was familiar with textile manufacturing) from Britain. Looking for opportunities he heard of the failing attempts at making cotton mills in
Pawtucket, Rhode Island Pawtucket is a city in Providence County, Rhode Island, United States. The population was 75,604 at the 2020 census, making the city the fourth-largest in the state. Pawtucket borders Providence and East Providence to the south, Central Fa ...
. Contacting the owners he promised to see if he could fix their mills—they offered him a full partnership if he succeeded. Declaring their early attempts unworkable he proceeded from January 1790 to December 1790 to build the first operational textile manufacturing facility in the United States. The
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
was off and running in the United States. Initially the cost of their textiles was slightly higher than the cost of equivalent British goods but the tariff helped protect their early start-up industry. Ashley notes that: : From 1790 onwards there were constant alterations in the tariff between 1792 and 1816 there were some twenty-five Tariff Acts passed, all modifying the customs duties in one way or another. But Hamilton's Report, and the ideas it embodied, do not seem to have exercised any special influence on the legislation of this period; the motives were always financial. Higher tariffs were adopted during and after the
War of 1812 The War of 1812 (18 June 1812 – 17 February 1815) was fought by the United States of America and its indigenous allies against the United Kingdom and its allies in British North America, with limited participation by Spain in Florida. It ...
, when nationalists such as
Henry Clay Henry Clay Sr. (April 12, 1777June 29, 1852) was an American attorney and statesman who represented Kentucky in both the U.S. Senate and House of Representatives. He was the seventh House speaker as well as the ninth secretary of state, ...
and
John C. Calhoun John Caldwell Calhoun (; March 18, 1782March 31, 1850) was an American statesman and political theorist from South Carolina who held many important positions including being the seventh vice president of the United States from 1825 to 1832. He ...
saw the need for more federal income and more industry. In wartime, they declared, having a home industry was a necessity to avoid shortages. Likewise owners of the small new factories that were springing up in the northeast to mass-produce boots, hats, nails and other common items wanted higher tariffs that would significantly protect them when the more efficient British producers returned after the war ended. A 10% discount on the customs tax was offered on items imported in American ships, so that the American merchant marine would be supported. Once industrialization and mass production started, the demand for higher and higher tariffs came from manufacturers and factory workers. They believed that their businesses should be protected from the lower wages and more efficient factories of Britain and the rest of Europe. Nearly every northern Congressman was eager to logroll a higher tariff rate for his local industry. Senator
Daniel Webster Daniel Webster (January 18, 1782 – October 24, 1852) was an American lawyer and statesman who represented New Hampshire and Massachusetts in the U.S. Congress and served as the U.S. Secretary of State under Presidents William Henry Harri ...
, formerly a spokesperson for Boston's merchants who imported goods (and wanted low tariffs), switched dramatically to represent the manufacturing interests in the
Tariff of 1824 The Tariff of 1824 (Sectional Tariff of 2019, ch. 4, , enacted May 22, 1824) was a protective tariff in the United States designed to protect American industry from cheaper British commodities, especially iron products, wool and cotton textile ...
. Rates were especially high for bolts of cloth and for bar iron, of which Britain was a low-cost producer. The culmination came in the Tariff of 1828, ridiculed by free traders as the "
Tariff of Abominations The Tariff of 1828 was a very high protective tariff that became law in the United States in May 1828. It was a bill designed to not pass Congress because it was seen by free trade supporters as hurting both industry and farming, but surprisi ...
", with import custom duties averaging over 25 percent. Intense political opposition to higher tariffs came from Southern Democrats and plantation owners in South Carolina who had little manufacturing industry and imported some products with high tariffs. They would have to pay more for imports. They claimed their economic interest was being unfairly injured. They attempted to "nullify" the federal tariff and spoke of secession from the Union (see the Nullification Crisis). President
Andrew Jackson Andrew Jackson (March 15, 1767 – June 8, 1845) was an American lawyer, planter, general, and statesman who served as the seventh president of the United States from 1829 to 1837. Before being elected to the presidency, he gained fame a ...
let it be known he would use the U.S. Army to enforce the law, and no state supported the South Carolina call for nullification. A compromise ended the crisis included a lowering of the average tariff rate over ten years to a rate of 15% to 20%.


Second Party System, 1829–1859

The Democrats dominated the
Second Party System Historians and political scientists use Second Party System to periodize the Political parties in the United States, political party system operating in the United States from about 1828 to 1852, after the First Party System ended. The system was ...
and set low tariffs designed to pay for the government but not protect industry. Their opponents the Whigs wanted high protective tariffs but usually were outvoted in Congress. Tariffs soon became a major political issue as the Whigs (1832–1852) and (after 1854) the
Republicans Republican can refer to: Political ideology * An advocate of a republic, a type of government that is not a monarchy or dictatorship, and is usually associated with the rule of law. ** Republicanism, the ideology in support of republics or agains ...
wanted to protect their mostly northern industries and constituents by voting for higher tariffs and the Southern Democrats, which had very little industry but imported many goods voted for lower tariffs. Each party as it came into power voted to raise or lower tariffs under the constraints that the Federal Government always needed a certain level of revenues. The
United States public debt The national debt of the United States is the total national debt owed by the federal government of the United States to Treasury security holders. The national debt at any point in time is the face value of the then-outstanding Treasury secu ...
was paid off in 1834 and President
Andrew Jackson Andrew Jackson (March 15, 1767 – June 8, 1845) was an American lawyer, planter, general, and statesman who served as the seventh president of the United States from 1829 to 1837. Before being elected to the presidency, he gained fame a ...
, a strong Southern Democrat, oversaw the cutting of the tariff rates roughly in half and eliminating nearly all federal excise taxes in about 1835.
Henry Clay Henry Clay Sr. (April 12, 1777June 29, 1852) was an American attorney and statesman who represented Kentucky in both the U.S. Senate and House of Representatives. He was the seventh House speaker as well as the ninth secretary of state, ...
and his Whig Party, envisioning a rapid modernization based on highly productive factories, sought a high tariff. Their key argument was that startup factories, or "infant industries", would at first be less efficient than European (British) producers. Furthermore, American factory workers were paid higher wages than their European competitors. The arguments proved highly persuasive in industrial districts. Clay's position was adopted in the 1828 and 1832 Tariff Acts. The Nullification Crisis forced a partial abandonment of the Whig position. When the Whigs won victories in the 1840 and 1842 elections, taking control of Congress, they re-instituted higher tariffs with the Tariff of 1842. In examining these debates Moore finds that they were not precursors to Civil War. Instead they looked backward and continued the old debate whether foreign trade policy should embrace free trade or protectionism.


Walker Tariff

The Democrats won in 1845, electing James K. Polk as president. Polk succeeded in passing the Walker tariff of 1846 by uniting the rural and agricultural factions of the entire country for lower tariffs. They sought a level of a "tariff for revenue only" that would pay the cost of government but not show favoritism to one section or economic sector at the expense of another. The Walker Tariff actually increased trade with Britain and others and brought in more revenue to the federal treasury than the higher tariff. The average tariff on the Walker Tariff was about 25%. While protectionists in Pennsylvania and neighboring states were angered, the South achieved its goal of setting low tariff rates before the Civil War.


Low tariff of 1857

The Walker Tariff remained in place until 1857, when a nonpartisan coalition lowered them again with the Tariff of 1857 to 18%. This was in response to the British repeal of their protectionist "
Corn Laws The Corn Laws were tariffs and other trade restrictions on imported food and corn enforced in the United Kingdom between 1815 and 1846. The word ''corn'' in British English denotes all cereal grains, including wheat, oats and barley. They wer ...
". The Democrats in Congress, dominated by Southern Democrats, wrote and passed the tariff laws in the 1830s, 1840s, and 1850s, and kept reducing rates, so that the 1857 rates were down to about 15%, a move that boosted trade so overwhelmingly that revenues actually increased, from just over $20 million in 1840 ($ billion in dollars), to more than $80 million by 1856 ($ billion). The South had almost no complaints but the low rates angered many Northern industrialists and factory workers, especially in Pennsylvania, who demanded protection for their growing iron industry. The
Republican Party Republican Party is a name used by many political parties around the world, though the term most commonly refers to the United States' Republican Party. Republican Party may also refer to: Africa *Republican Party (Liberia) * Republican Part ...
replaced the Whigs in 1854 and also favored high tariffs to stimulate industrial growth; it was part of the 1860 Republican platform.''Republican Party National Platform, 1860''
Reported from the Platform Committee by Judge Jessup of Pennsylvania and adopted unanimously by the Republican National Convention held at Chicago on May 17, 1860. Broadside printing by ''The Chicago Press & Tribune'', May, 1860


Third Party System

After the Second Party System ended in 1854 the Democrats lost control and the new Republican Party had its opportunity to raise rates. The Morrill Tariff significantly raising tariff rates became possible only after the Southern Senators walked out of Congress when their states left the Union, leaving a Republican majority. It was signed by Democratic President
James Buchanan James Buchanan Jr. ( ; April 23, 1791June 1, 1868) was an American lawyer, diplomat and politician who served as the 15th president of the United States from 1857 to 1861. He previously served as secretary of state from 1845 to 1849 and repr ...
in early March 1861 shortly before President
Abraham Lincoln Abraham Lincoln ( ; February 12, 1809 – April 15, 1865) was an American lawyer, politician, and statesman who served as the 16th president of the United States from 1861 until his assassination in 1865. Lincoln led the nation thro ...
took office. Pennsylvania iron mills and New England woolen mills mobilized businessmen and workers to call for high tariffs, but Republican merchants wanted low tariffs. The high tariff advocates lost in 1857, but stepped up their campaign by blaming the economic recession of 1857 on the lower rates. Economist Henry Charles Carey of Philadelphia was the most outspoken advocate, along with
Horace Greeley Horace Greeley (February 3, 1811 – November 29, 1872) was an American newspaper editor and publisher who was the founder and editor of the '' New-York Tribune''. Long active in politics, he served briefly as a congressman from New York, ...
and his influential newspaper, the
New York Tribune The ''New-York Tribune'' was an American newspaper founded in 1841 by editor Horace Greeley. It bore the moniker ''New-York Daily Tribune'' from 1842 to 1866 before returning to its original name. From the 1840s through the 1860s it was the domi ...
. Increases were finally enacted in February 1861 after Southerners resigned their seats in Congress on the eve of the
Civil War A civil war or intrastate war is a war between organized groups within the same state (or country). The aim of one side may be to take control of the country or a region, to achieve independence for a region, or to change government polic ...
. Some historians in recent decades have minimized the tariff issue as a cause of the war, noting that few people in 1860–61 said it was of central importance to them. Compromises were proposed in 1860–61 to save the Union, but they did not involve the tariff. Arguably, the effects of a tariff enacted in March 1861 could have made little effect upon any delegation which met prior to its signing. It is indicative of the Northern industrial supported and anti-agrarian position of the 1861 Republican-controlled congress. Some secessionist documents do mention a tariff issue, though not nearly as often as the preservation of the institution of slavery. However, a few
libertarian Libertarianism (from french: libertaire, "libertarian"; from la, libertas, "freedom") is a political philosophy that upholds liberty as a core value. Libertarians seek to maximize autonomy and political freedom, and minimize the state's e ...
economists place more importance on the tariff issue. The arguments that tariffs were a major cause of the Civil War have become a staple of the
Lost Cause of the Confederacy The Lost Cause of the Confederacy (or simply Lost Cause) is an History of the United States, American pseudohistorical historical negationist, negationist mythology that claims the cause of the Confederate States during the American Civil Wa ...
.


1860–1912


Civil War

During the war far more revenue was needed, so the rates were raised again and again, along with many other taxes such as excise taxes on luxuries and income taxes on the rich. By far most of the wartime government revenue came from bonds and loans ($2.6 billion), not taxes ($357 million) or tariffs ($305 million). The Morrill Tariff took effect a few weeks before the war began on April 12, 1861, and was not collected in the South. The
Confederate States of America The Confederate States of America (CSA), commonly referred to as the Confederate States or the Confederacy was an unrecognized breakaway republic in the Southern United States that existed from February 8, 1861, to May 9, 1865. The Confede ...
(CSA) passed its own tariff of about 15% on most items, including many items that previously were duty-free from the North. Previously tariffs between states were prohibited. The Confederates believed that they could finance their government by tariffs. The anticipated tariff revenue never appeared as the Union Navy blockaded their ports and the Union army restricted their trade with the Northern states. The Confederacy collected a mere $3.5 million in tariff revenue from the Civil War start to end and had to resort to inflation and confiscation instead for revenue.


Reconstruction era

Historian Howard K. Beale argued that high tariffs were needed during the Civil War, but were retained after the war for the benefit of Northern industrialists, who would otherwise lose markets and profits. To keep political control of Congress, Beale argued, Northern Industrialists worked through the Republican Party and supported Reconstruction policies that kept low-tariff Southern whites out of power. The Beale thesis was widely disseminated by the influential survey of
Charles A. Beard Charles Austin Beard (1874–1948) was an American historian and professor, who wrote primarily during the first half of the 20th century. A history professor at Columbia University, Beard's influence is primarily due to his publications in the f ...
, ''The Rise of American Civilization'' (1927). In the late 1950s historians rejected the Beale–Beard thesis by showing that Northern businessmen were evenly divided on the tariff, and were not using Reconstruction policies to support it.


Politics of protection

The iron and steel industry, and the wool industry, were the well-organized interests groups that demanded (and usually obtained) high tariffs through support of the Republican Party. Industrial workers had much higher wages than their European counterparts, and they credited it to the tariff and voted Republican. Democrats were divided on the issue, in large part because of pro-tariff elements in the Pennsylvania party who wanted to protect the growing iron industry, as well as pockets of high tariff support in nearby industrializing states. However President
Grover Cleveland Stephen Grover Cleveland (March 18, 1837June 24, 1908) was an American lawyer and politician who served as the 22nd and 24th president of the United States from 1885 to 1889 and from 1893 to 1897. Cleveland is the only president in American ...
made low tariffs the centerpiece of Democratic Party policies in the late 1880s. His argument is that high tariffs were an unnecessary and unfair tax on consumers. The South and West generally supported low tariffs, and the industrial East high tariffs. Republican
William McKinley William McKinley (January 29, 1843September 14, 1901) was the 25th president of the United States, serving from 1897 until his assassination in 1901. As a politician he led a realignment that made his Republican Party largely dominant in t ...
was the outstanding spokesman for high tariffs, promising it would bring prosperity for all groups. After the Civil War, high tariffs remained as the Republican Party remained in office and the Southern Democrats were restricted from office. Advocates insisted that tariffs brought prosperity to the nation as a whole and no one was really injured. As industrialization proceeded apace throughout the Northeast, some Democrats, especially Pennsylvanians, became high tariff advocates.


Farmers and wool

The Republican high-tariff advocates appealed to farmers with the theme that high-wage factory workers would pay premium prices for foodstuffs. This was the "home market" idea, and it won over most farmers in the Northeast, but it had little relevance to the southern and western farmers who exported most of their cotton, tobacco and wheat. In the late 1860s the wool manufacturers (based near Boston and Philadelphia) formed the first national lobby, and cut deals with wool-growing farmers in several states. Their challenge was that fastidious wool producers in Britain and Australia marketed a higher quality fleece than the Americans, and that British manufacturers had costs as low as the American mills. The result was a wool tariff that helped the farmers by a high tariff rate on imported wool—a tariff the American manufacturers had to pay—together with a high tariff on finished woolens and worsted goods.Tom E. Terrill, ''The Tariff, Politics, and American Foreign Policy 1874–1901'' (1973)


U.S. industrial output

Apart from wool and woolens, American industry and agriculture—and industrial workers—had become the most efficient in the world in most industries by the 1880s as they took the lead in the
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
. No other country had the industrial capacity, large market, high efficiency and low costs, or the complex distribution system needed to compete in most markets in the vast American market. Most imports were a few "luxury" goods. Indeed, it was the British who watched cheaper American products flooded their home islands. The ''London Daily Mail'' in 1900 complained:
We have lost to the American manufacturer electrical machinery, locomotives, steel rails, sugar-producing and agricultural machinery, and latterly even stationary engines, the pride and backbone of the British engineering industry.
Nevertheless, some American manufacturers and union workers demanded the high tariff be maintained. The tariff represented a complex balance of forces. Railroads, for example, consumed vast quantities of steel. To the extent tariffs raised steel prices, they paid much more making possible the U.S steel industry's massive investment to expand capacity and switch to the Bessemer process and later to the open hearth furnace. Between 1867 and 1900 U.S. steel production increased more than 500 times from 22,000 tons to 11,400,000 tons and Bessemer steel rails, first made in the U.S that would last 18 years under heavy traffic, would come to replace the old wrought iron rail that could only endure two years under light service. Taussig says that in 1881, British steel rails sold for $31 a ton, and if Americans imported them they paid a $28/ton tariff, giving $59/ton for an imported ton of rails. American mills charged $61/ton and made a good profit, which was then reinvested into increased capacity, higher quality steels, higher wages and benefits and more efficient production. By 1897 the American steel rail price had dropped to $19.60 per ton compared to the British price at $21.00—not including the $7.84 duty charge—demonstrating that the tariff had performed its purpose of giving the industry time to become competitive. Then the U.S. steel industry became an exporter of steel rail to England selling below the British price and during WW I would become the largest supplier of steel to the allies. From 1915 through 1918, the largest American steel company, U.S. Steel, alone delivered more steel each year than Germany and Austria-Hungary combined, totaling 99,700,000 tons during WW I. The Republicans became masters of negotiating exceedingly complex arrangements so that inside each of their congressional districts there were more satisfied "winners" than disgruntled "losers". The tariff after 1880 was an ideological relic with no longer any economic rationale.


Cleveland tariff policy

Democratic President
Grover Cleveland Stephen Grover Cleveland (March 18, 1837June 24, 1908) was an American lawyer and politician who served as the 22nd and 24th president of the United States from 1885 to 1889 and from 1893 to 1897. Cleveland is the only president in American ...
redefined the issue in 1887, with his stunning attack on the tariff as inherently corrupt, opposed to true republicanism, and inefficient to boot: "When we consider that the theory of our institutions guarantees to every citizen the full enjoyment of all the fruits of his industry and enterprise... it is plain that the exaction of more than inimal taxesis indefensible extortion and a culpable betrayal of American fairness and justice." The election of 1888 was fought primarily over the tariff issue, and Cleveland lost. Republican Congressman
William McKinley William McKinley (January 29, 1843September 14, 1901) was the 25th president of the United States, serving from 1897 until his assassination in 1901. As a politician he led a realignment that made his Republican Party largely dominant in t ...
argued,
Free foreign trade gives our money, our manufactures, and our markets to other nations to the injury of our labor, our tradespeople, and our farmers. Protection keeps money, markets, and manufactures at home for the benefit of our own people.
Democrats campaigned energetically against the high McKinley tariff of 1890, and scored sweeping gains that year; they restored Cleveland to the White House in 1892. The severe depression that started in 1893 ripped apart the Democratic party. Cleveland and the pro-business Bourbon Democrats insisted on a much lower tariff. His problem was that Democratic electoral successes had brought in Democratic congressmen from industrial districts who were willing to raise rates to benefit their constituents. The
Wilson–Gorman Tariff Act The Revenue Act or Wilson-Gorman Tariff of 1894 (ch. 349, §73, , August 27, 1894) slightly reduced the United States tariff rates from the numbers set in the 1890 McKinley tariff and imposed a 2% tax on income over $4,000. It is named for W ...
of 1894 did lower overall rates from 50 percent to 42 percent, but contained so many concessions to protectionism that Cleveland refused to sign it (it became law anyway).


McKinley tariff policy

McKinley campaigned heavily in 1896 on the high tariff as a positive solution to depression. Promising protection and prosperity to every economic sector, he won a smashing victory. The Republicans rushed through the Dingley tariff in 1897, boosting rates back to the 50 percent level. Democrats responded that the high rates created government sponsored "trusts" (monopolies) and led to higher consumer prices. McKinley won reelection by an even bigger landslide and started talking about a post-tariff era of reciprocal trade agreements. Reciprocity went nowhere; McKinley's vision was a half century too early. The Republicans split bitterly on the Payne–Aldrich Tariff of 1909. Republican President
Theodore Roosevelt Theodore Roosevelt Jr. ( ; October 27, 1858 – January 6, 1919), often referred to as Teddy or by his initials, T. R., was an American politician, statesman, soldier, conservationist, naturalist, historian, and writer who served as the 26t ...
(1901–1909) saw the tariff issue was ripping his party apart, so he postponed any consideration of it. The delicate balance flew apart on under Republican
William Howard Taft William Howard Taft (September 15, 1857March 8, 1930) was the 27th president of the United States (1909–1913) and the tenth chief justice of the United States (1921–1930), the only person to have held both offices. Taft was elected pr ...
. He campaigned for president in 1908 for tariff "reform", which everyone assumed meant lower rates. The House lowered rates with the Payne Bill, then sent it to the Senate where
Nelson Wilmarth Aldrich Nelson Wilmarth Aldrich (/ ˈɑldɹɪt͡ʃ/; November 6, 1841 – April 16, 1915) was a prominent American politician and a leader of the Republican Party in the United States Senate, where he represented Rhode Island from 1881 to 1911. By the ...
mobilized high-rate Senators. Aldrich was a New England businessman and a master of the complexities of the tariff, the Midwestern Republican insurgents were rhetoricians and lawyers who distrusted the special interests and assumed the tariff was "sheer robbery" at the expense of the ordinary consumer. Rural America believed that its superior morality deserved special protection, while the dastardly immorality of the trusts—and cities generally—merited financial punishment. Aldrich baited them. Did the insurgents want lower tariffs? His wickedly clever Payne–Aldrich Tariff Act of 1909 lowered the protection on Midwestern farm products, while raising rates favorable to his Northeast. By 1913 with the new income tax generating revenue, the Democrats in Congress were able to reduce rates with the
Underwood Tariff The Revenue Act of 1913, also known as the Underwood Tariff or the Underwood-Simmons Act (ch. 16, ), re-established a federal income tax in the United States and substantially lowered tariff rates. The act was sponsored by Representative Oscar Un ...
. The outbreak of war in 1914 made the impact of tariffs of much less importance compared to war contracts. When the Republicans returned to power they returned the rates to a high level in the Fordney–McCumber Tariff of 1922. The next raise came with the Smoot–Hawley Tariff Act of 1930 at the start of the Great Depression.


Tariff with Canada

The Canadian–American Reciprocity Treaty increased trade between 1855 and its ending in 1866. When it ended Canada turned to tariffs. The National Policy was a Canadian economic program introduced by
John A. Macdonald Sir John Alexander Macdonald (January 10 or 11, 1815 – June 6, 1891) was the first prime minister of Canada, serving from 1867 to 1873 and from 1878 to 1891. The dominant figure of Canadian Confederation, he had a political career that sp ...
's Conservative Party in 1879 after it returned to power. It had been an official policy, however, since 1876. It was based on high tariffs to protect Canada's manufacturing industry. Macdonald campaigned on the policy in the 1878 election, and handily beat the Liberal Party, which supported free trade. Efforts to restore free trade with Canada collapsed when Canada rejected a proposed reciprocity treaty in fear of
American imperialism American imperialism refers to the expansion of American political, economic, cultural, and media influence beyond the boundaries of the United States. Depending on the commentator, it may include imperialism through outright military conquest ...
in the 1911 federal election. Taft negotiated a reciprocity agreement with Canada, that had the effect of sharply lowering tariffs. Democrats supported the plan but Midwestern Republicans bitterly opposed it. Barnstorming the country for his agreement, Taft undiplomatically pointed to the inevitable integration of the North American economy, and suggested that Canada should come to a "parting of the ways" with Britain. Canada's Conservative Party, under the leadership of
Robert Borden Sir Robert Laird Borden (June 26, 1854 – June 10, 1937) was a Canadian lawyer and politician who served as the eighth prime minister of Canada from 1911 to 1920. He is best known for his leadership of Canada during World War I. Borden ...
, now had an issue to regain power from the low-tariff Liberals; after a surge of pro-imperial anti-Americanism, the Conservatives won. Ottawa rejected reciprocity, reasserted the National Policy and went to London first for new financial and trade deals. The Payne Aldrich Tariff of 1909 actually changed little and had slight economic impact one way or the other, but the political impact was enormous. The insurgents felt tricked and defeated and swore vengeance against Wall Street and its minions Taft and Aldrich. The insurgency led to a fatal split down the middle in 1912 as the GOP lost its balance wheel.


1913 to present

Starting in the Civil War, protection was the ideological cement holding the Republican coalition together. High tariffs were used to promise higher sales to business, higher wages to industrial workers, and higher demand for their crops to farmers. Democrats said it was a tax on the little man. After 1900 Progressive insurgents said it promoted monopoly. It had greatest support in the Northeast, and greatest opposition in the South and West. The Midwest was the battle ground. The tariff issue was pulling the GOP apart. Roosevelt tried to postpone the issue, but Taft had to meet it head on in 1909 with the Payne–Aldrich Tariff Act. Eastern conservatives led by Nelson W. Aldrich wanted high tariffs on manufactured goods (especially woolens), while Midwesterners called for low tariffs. Aldrich outmaneuvered them by lowering the tariff on farm products, which outraged the farmers. The great battle over the high Payne–Aldrich Tariff Act in 1910 ripped the Republicans apart and set up the realignment in favor of the Democrats.
Woodrow Wilson Thomas Woodrow Wilson (December 28, 1856February 3, 1924) was an American politician and academic who served as the 28th president of the United States from 1913 to 1921. A member of the Democratic Party, Wilson served as the president of P ...
made a drastic lowering of tariff rates a major priority for his presidency. The 1913
Underwood Tariff The Revenue Act of 1913, also known as the Underwood Tariff or the Underwood-Simmons Act (ch. 16, ), re-established a federal income tax in the United States and substantially lowered tariff rates. The act was sponsored by Representative Oscar Un ...
cut rates, but the coming of World War I in 1914 radically revised trade patterns. Reduced trade and, especially, the new revenues generated by the federal income tax made tariffs much less important in terms of economic impact and political rhetoric. The Wilson administration desired a 'revamping' of the current banking system, "...so that the banks may be the instruments, not the masters, of business and of individual enterprise and initiative.". President Wilson achieved this in the
Federal Reserve Act The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States. The Pani ...
of 1913. Working with the bullish Senator Aldrich and former presidential candidate William Jennings Bryan, he perfected a way to centralize the banking system to allow Congress to closely allocate paper money production. The Federal Reserve Act, with the Sixteenth Amendment of the Constitution, would create a trend of new forms of government funding. Ihe Democrats lowered the tariff in 1913 but the economic dislocations of the First World War made it irrelevant. When the Republicans returned to power in 1921 they again imposed a protective tariff. They raised it again with the Smoot–Hawley Tariff Act of 1930 to meet the
Great Depression in the United States In the United States, the Great Depression began with the Wall Street Crash of October 1929 and then spread worldwide. The nadir came in 1931–1933, and recovery came in 1940. The stock market crash marked the beginning of a decade of high ...
. But that made the depression worse. This time it backfired, as Canada, Britain, Germany, France and other industrial countries retaliated with their own tariffs and special, bilateral trade deals. American imports and exports both went into a tailspin. The Democrats promised an end to protection on a reciprocal country-by-country basis (which they did), hoping this would expand foreign trade (which it did not). By 1936 the tariff issue had faded from politics, and the revenue it raised was small. In World War II, both tariffs and reciprocity were insignificant compared to trade channeled through
Lend-Lease Lend-Lease, formally the Lend-Lease Act and introduced as An Act to Promote the Defense of the United States (), was a policy under which the United States supplied the United Kingdom, the Soviet Union and other Allied nations with food, oil, ...
. Low rates dominated the debate for the rest of the 20th century. In 2017 Donald Trump promised to use protective tariffs as a weapon to restore greatness to the economy.


Tariffs and the Great Depression

The years 1920 to 1929 are generally misdescribed as years in which protectionism increased in Europe. In fact, from a general point of view, the crisis was preceded in Europe by trade liberalisation. The weighted average of tariffs remained tendentially the same as in the years preceding the First World War: 24.6% in 1913, as against 24.9% in 1927. In 1928 and 1929, tariffs were lowered in almost all developed countries. In addition, the Smoot-Hawley Tariff Act was signed by Hoover on June 17, 1930, while the Wall Street crash took place in the fall of 1929. Most of the trade contraction occurred between January 1930 and July 1932, before most protectionist measures were introduced (except for the limited measures applied by the United States in the summer of 1930). In the view of Maurice Allais, it was therefore the collapse of international liquidity that caused the contraction of trade, not customs tariffs.
Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...
also held the opinion that the Smoot–Hawley tariff of 1930 did not cause the Great Depression. Douglas A. Irwin writes : "most economists, both liberal and conservative, doubt that Smoot Hawley played much of a role in the subsequent contraction." Peter Temin, explains a tariff is an expansionary policy, like a devaluation as it diverts demand from foreign to home producers. He notes that exports were 7 percent of GNP in 1929, they fell by 1.5 percent of 1929 GNP in the next two years and the fall was offset by the increase in domestic demand from tariff. He concludes that contrary the popular argument, contractionary effect of the tariff was small. (Temin, P. 1989. ''Lessons from the Great Depression'', MIT Press, Cambridge, Mass) William J. Bernstein wrote: Paul Krugman writes that protectionism does not lead to recessions. According to him, the decrease in imports (which can be obtained by the introduction of tariffs) has an expansionary effect, i.e. favourable to growth. Thus in a trade war, since exports and imports will decrease equally, for the whole world, the negative effect of a decrease in exports will be compensated by the expansionary effect of a decrease in imports. A trade war therefore does not cause a recession. Furthermore, he notes that the Smoot-Hawley tariff did not cause the Great Depression. The decline in trade between 1929 and 1933 "was almost entirely a consequence of the Depression, not a cause. Trade barriers were a response to the Depression, in part a consequence of deflation."


Trade liberalization

Tariffs up to the Smoot–Hawley Tariff Act of 1930, were set by Congress after many months of testimony and negotiations. In 1934, the U.S. Congress, in a rare delegation of authority, passed the Reciprocal Tariff Act of 1934, which authorized the executive branch to negotiate bilateral tariff reduction agreements with other countries. The prevailing view then was that trade liberalization may help stimulate economic growth. However, no one country was willing to liberalize unilaterally. Between 1934 and 1945, the executive branch negotiated over 32 bilateral trade liberalization agreements with other countries. The belief that low tariffs led to a more prosperous country are now the predominant belief with some exceptions. Multilateralism is embodied in the seven tariff reduction rounds that occurred between 1948 and 1994. In each of these "rounds", all
General Agreement on Tariffs and Trade The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its ...
(GATT) members came together to negotiate mutually agreeable trade liberalization packages and reciprocal tariff rates. In the Uruguay round in 1994, the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and ...
(WTO) was established to help establish uniform tariff rates. Currently only about 30% of all import goods are subject to tariffs in the United States, the rest are on the free list. The "average" tariffs now charged by the United States are at a historic low. The list of negotiated tariffs are listed on the Harmonized Tariff Schedule as put out by the United States International Trade Commission.


Post World War II

After the war the U.S. promoted the
General Agreement on Tariffs and Trade The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its ...
(GATT) established in 1947, to minimize tariffs and other restrictions, and to liberalize trade among all capitalist countries. In 1995 GATT became the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and ...
(WTO); with the collapse of Communism its open markets/low tariff ideology became dominant worldwide in the 1990s. American industry and labor prospered after World War II, but hard times set in after 1970. For the first time there was stiff competition from low-cost producers around the globe. Many rust belt industries faded or collapsed, especially the manufacture of steel, TV sets, shoes, toys, textiles and clothing.
Toyota is a Japanese multinational automotive manufacturer headquartered in Toyota City, Aichi, Japan. It was founded by Kiichiro Toyoda and incorporated on . Toyota is one of the largest automobile manufacturers in the world, producing about 10 ...
and Nissan threatened the giant domestic auto industry. In the late 1970s Detroit and the auto workers union combined to fight for protection. They obtained not high tariffs, but a voluntary restriction of imports from the Japanese government. Quotas were two-country diplomatic agreements that had the same protective effect as high tariffs, but did not invite retaliation from third countries. By limiting the number of Japanese automobiles that could be imported, quotas inadvertently helped Japanese companies push into larger, and more expensive market segments. The Japanese producers, limited by the number of cars they could export to America, opted to increase the value of their exports to maintain revenue growth. This action threatened the American producers' historical hold on the mid- and large-size car markets. The Chicken tax was a 1964 response by President Lyndon B. Johnson to tariffs placed by Germany (then West Germany) on importation of US chicken. Beginning in 1962, during the President Kennedy administration, the US accused Europe of unfairly restricting imports of American poultry at the request of West German chicken farmers. Diplomacy failed, and in January 1964, two months after taking office, President Johnson retaliated by imposing a 25 percent tax on all imported light trucks. This directly affected the German built Volkswagen vans. Officially it was explained that the light trucks tax would offset the dollar amount of imports of Volkswagen vans from West Germany with the lost American sales of chickens to Europe. But audio tapes from the Johnson White House reveal that in January 1964, President Johnson was attempting to convince
United Auto Workers The International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America, better known as the United Auto Workers (UAW), is an American labor union that represents workers in the United States (including Puerto Rico ...
's president Walter Reuther, not to initiate a strike just prior the 1964 election and to support the president's civil rights platform. Reuther in turn wanted Johnson to respond to Volkswagen's increased shipments to the United States.


1980s to present

During the Reagan and George H. W. Bush administrations Republicans abandoned protectionist policies, and came out against quotas and in favor of the GATT/WTO policy of minimal economic barriers to global trade. Free trade with Canada came about as a result of the Canada–U.S. Free Trade Agreement of 1987, which led in 1994 to the North American Free Trade Agreement (NAFTA). It was based on Reagan's plan to enlarge the scope of the market for American firms to include Canada and Mexico. President
Bill Clinton William Jefferson Clinton (Birth name, né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 ...
, with strong Republican support in 1993, pushed NAFTA through Congress over the vehement objection of labor unions. Likewise, in 2000 Clinton worked with Republicans to give China entry into WTO and " most favored nation" trading status (i.e., the same low tariffs promised to any other WTO member). NAFTA and WTO advocates promoted an optimistic vision of the future, with prosperity to be based on intellectuals skills and managerial know-how more than on routine hand labor. They promised that free trade meant lower prices for consumers. Opposition to liberalized trade came increasingly from labor unions, who argued that this system also meant lower wages and fewer jobs for American workers who could not compete against wages of less than a dollar an hour. The shrinking size and diminished political clout of these unions repeatedly left them on the losing side. Despite overall decreases in international tariffs, some tariffs have been more resistant to change. For example, due partially to tariff pressure from the European
Common Agricultural Policy The Common Agricultural Policy (CAP) is the agricultural policy of the European Union. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce th ...
, US agricultural subsidies have seen little decrease over the past few decades, even in the face of recent pressure from the WTO during the latest Doha talks. On March 5, 2002, President George W. Bush placed tariffs on imported steel.


Deindustrialization

The Economic Policy Institute, a left-leaning think tank, has claimed that free trade created a large trade deficit in the United States for decades which lead to the closure of many factories and cost the United States millions of jobs in the manufacturing sector. However, other groups such as the CATO Institute have said that free trade is not a significant contributor to deindustrialization trends. Trade can lead to loss of low-skilled or superfluous manufacturing jobs, but these tend to be replaced by higher-paying, higher-skilled manufacturing jobs in other sectors where the U.S. has a competitive advantage. Moreover, trade deficits lead to significant wage losses, not only for workers in the manufacturing sector, but also for all workers throughout the economy who do not have a university degree. For example, in 2011, 100 million full-time, full-year workers without a university degree suffered an average loss of $1,800 on their annual salary. While trade may have exacerbated some aspects of the deindustrialization seen in America since the 1980s, increased productivity and factory automation played a much more significant role. Moreover, some aspects of deindustrialization are illusionary, as many factories moved out of high-visibility and concentrated urban areas to rural areas, thus giving an impression of jobs being lost when there simply moved elsewhere in the U.S. According to the EPI, trade agreements have not reduced trade deficits but rather increased them, but evidence shows that trade agreements do not have significant impacts on trade deficits, and can even close the trade gap between countries.


Smuggling and Coast Guard

Historically, high tariffs have led to high rates of smuggling. The
United States Revenue Cutter Service ) , colors= , colors_label= , march= , mascot= , equipment= , equipment_label= , battles= , anniversaries=4 August , decorations= , battle_honours= , battle_honours_label= , disbanded=28 January 1915 , flying_hours= , website= , commander1= , co ...
was established by Secretary Hamilton in 1790 as an armed maritime law and custom enforcement service. Today it remains the primary maritime law enforcement force in the United States. The U.S. Customs and Border Protection (CBP) is a federal law enforcement agency of the United States
Department of Homeland Security The United States Department of Homeland Security (DHS) is the U.S. federal executive department responsible for public security, roughly comparable to the interior or home ministries of other countries. Its stated missions involve anti-te ...
charged with regulating and facilitating international trade, collecting customs (import duties or tariffs approved by the U.S. Congress), and enforcing U.S. regulations, including trade, customs and immigration. They man most border crossing stations and ports. When shipments of goods arrive at a border crossing or port, customs officers inspect the contents and charge a tax according to the tariff formula for that product. Usually the goods cannot continue on their way until the custom duty is paid. Custom duties are one of the easiest taxes to collect, and the cost of collection is small.


Tariffs and historical American politicians

In 1896, the GOP platform pledged to "renew and emphasize our allegiance to the policy of protection, as the bulwark of American industrial independence, and the foundation of development and prosperity. This true American policy taxes foreign products and encourages home industry. It puts the burden of revenue on foreign goods; it secures the American market for the American producer. It upholds the American standard of wages for the American workingman."


George Washington

"I use no porter or cheese in my family, but such as is made in America," the inaugural President George Washington wrote, boasting that these domestic products are "of an excellent quality." One of the first acts of Congress Washington signed was a tariff among whose stated purpose was "the encouragement and protection of manufactures." In his 1790
State of the Union Address The State of the Union Address (sometimes abbreviated to SOTU) is an annual message delivered by the president of the United States to a joint session of the United States Congress near the beginning of each calendar year on the current condi ...
, Washington justified his tariff policy for national security reasons:
A free people ought not only to be armed, but disciplined; to which end a uniform and well-digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent of others for essential, particularly military, supplies


Thomas Jefferson

As President
Thomas Jefferson Thomas Jefferson (April 13, 1743 – July 4, 1826) was an American statesman, diplomat, lawyer, architect, philosopher, and Founding Father who served as the third president of the United States from 1801 to 1809. He was previously the nati ...
wrote in explaining why his views had evolved to favor more protectionist policies: "In so complicated a science as political economy, no one axiom can be laid down as wise and expedient for all times and circumstances, and for their contraries." After the
War of 1812 The War of 1812 (18 June 1812 – 17 February 1815) was fought by the United States of America and its indigenous allies against the United Kingdom and its allies in British North America, with limited participation by Spain in Florida. It ...
, Jefferson's position began to resemble that of Washington, some level of protection was necessary to secure the nation's political independence. He said:
experience has taught me that manufactures are now as necessary to our independence as to our comfort: and if those who quote me as of a different opinion will keep pace with me in purchasing nothing foreign where an equivalent of domestic fabric can be obtained, without regard to difference of price


Henry Clay

In 1832, then the
United States Senator The United States Senate is the upper chamber of the United States Congress, with the House of Representatives being the lower chamber. Together they compose the national bicameral legislature of the United States. The composition and p ...
from
Kentucky Kentucky ( , ), officially the Commonwealth of Kentucky, is a state in the Southeastern region of the United States and one of the states of the Upper South. It borders Illinois, Indiana, and Ohio to the north; West Virginia and Virgini ...
, Henry Clay said about his disdain for "free traders" that "it is not free trade that they are recommending to our acceptance. It is in effect, the British colonial system that we are invited to adopt; and, if their policy prevail, it will lead substantially to the re-colonization of these States, under the commercial dominion of Great Britain."https://www.senate.gov/artandhistory/history/resources/pdf/AmericanSystem.pdf Clay said:
When gentlemen have succeeded in their design of an immediate or gradual destruction of the American System, what is their substitute? Free trade! Free trade! The call for free trade is as unavailing as the cry of a spoiled child, in its nurse's arms, for the moon, or the stars that glitter in the firmament of heaven. It never has existed; it never will exist. Trade implies, at least two parties. To be free, it should be fair, equal and reciprocal.
Clay explained that "equal and reciprocal" free trade "never has existed; ndit never will exist." He warned against practicing "romantic trade philanthropy… which invokes us to continue to purchase the produce of foreign industry, without regard to the state or prosperity of our own." Clay that he was "utterly and irreconcilably opposed" to trade which would "throw wide open our ports to foreign productions" without reciprocation.


James Monroe

In 1822, President
James Monroe James Monroe ( ; April 28, 1758July 4, 1831) was an American statesman, lawyer, diplomat, and Founding Father who served as the fifth president of the United States from 1817 to 1825. A member of the Democratic-Republican Party, Monroe wa ...
observed that "whatever may be the abstract doctrine in favor of unrestricted commerce," the conditions necessary for its success—reciprocity and international peace—"has never occurred and can not be expected." Monroe said, "strong reasons… impose on us the obligation to cherish and sustain our manufactures."


Abraham Lincoln

President
Abraham Lincoln Abraham Lincoln ( ; February 12, 1809 – April 15, 1865) was an American lawyer, politician, and statesman who served as the 16th president of the United States from 1861 until his assassination in 1865. Lincoln led the nation thro ...
declared, "Give us a protective tariff and we will have the greatest nation on earth." Lincoln warned that "the abandonment of the protective policy by the American Government… must produce want and ruin among our people." Lincoln similarly said that, "if a duty amount to full protection be levied upon an article" that could be produced domestically, "at no distant day, in consequence of such duty," the domestic article "will be sold to our people cheaper than before." Additionally, Lincoln argued that based on economies of scale, any temporary increase in costs resulting from a tariff would eventually decrease as the domestic manufacturer produced more. Lincoln did not see a tariff as a tax on low-income Americans because it would only burden the consumer according to the amount the consumer consumed. By the tariff system, the whole revenue is paid by the consumers of foreign goods... the burthen of revenue falls almost entirely on the wealthy and luxurious few, while the substantial and laboring many who live at home, and upon home products, go entirely free. Lincoln argued that a tariff system was less intrusive than domestic taxation: The tariff is the cheaper system, because the duties, being collected in large parcels at a few commercial points, will require comparatively few officers in their collection; while by the direct tax system, the land must be literally covered with assessors and collectors, going forth like swarms of Egyptian locusts, devouring every blade of grass and other green thing.


William McKinley

President
William McKinley William McKinley (January 29, 1843September 14, 1901) was the 25th president of the United States, serving from 1897 until his assassination in 1901. As a politician he led a realignment that made his Republican Party largely dominant in t ...
stated the United States' stance under the Republican Party as:
Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man. t is saidthat protection is immoral.... Why, if protection builds up and elevates 63,000,000
he U.S. population He or HE may refer to: Language * He (pronoun), an English pronoun * He (kana), the romanization of the Japanese kana へ * He (letter), the fifth letter of many Semitic alphabets * He (Cyrillic), a letter of the Cyrillic script called ''He'' in ...
of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefiting mankind everywhere
ree tradedestroys the dignity and independence of American labor... It will take away from the people of this country who work for a living—and the majority of them live by the sweat of their faces—it will take from them heart and home and hope. It will be self-destruction.
He also categorically rejected the "cheaper is better" argument:


Theodore Roosevelt

President
Theodore Roosevelt Theodore Roosevelt Jr. ( ; October 27, 1858 – January 6, 1919), often referred to as Teddy or by his initials, T. R., was an American politician, statesman, soldier, conservationist, naturalist, historian, and writer who served as the 26t ...
believed that America's economic growth was due to the protective tariffs, which helped her industrialize. He acknowledged this in his State of the Union address from 1902:
The country has acquiesced in the wisdom of the protective-tariff principle. It is exceedingly undesirable that this system should be destroyed or that there should be violent and radical changes therein. Our past experience shows that great prosperity in this country has always come under a protective tariff.


Donald Trump

The ''Trump tariffs'' were imposed by
executive order In the United States, an executive order is a directive by the president of the United States that manages operations of the federal government. The legal or constitutional basis for executive orders has multiple sources. Article Two of ...
(not by act of Congress) during the
presidency A presidency is an administration or the executive, the collective administrative and governmental entity that exists around an office of president of a state or nation. Although often the executive branch of government, and often personified by ...
of
Donald Trump Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021. Trump graduated from the Wharton School of the University of ...
as part of his
economic policy The economy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the e ...
. In January 2018, Trump imposed tariffs on
solar panel A solar cell panel, solar electric panel, photo-voltaic (PV) module, PV panel or solar panel is an assembly of photovoltaic solar cells mounted in a (usually rectangular) frame, and a neatly organised collection of PV panels is called a pho ...
s and
washing machine A washing machine (laundry machine, clothes washer, washer, or simply wash) is a home appliance used to wash laundry. The term is mostly applied to machines that use water as opposed to dry cleaning (which uses alternative cleaning fluids and ...
s of 30 to 50 percent. He soon imposed tariffs on steel (25%) and aluminum (10%) from most countries. On June 1, 2018, this was extended on the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
, Canada, and Mexico. Separately, on May 10, the Trump administration set a tariff of 25% on 818 categories of goods imported from China worth $50 billion. The only country which remained exempt from the steel and aluminum tariffs was Australia. Argentinian and Brazilian aluminium tariffs were started on December 2, 2019 in reaction to currency manipulation


References


Further reading

* Bils, Mark. "Tariff protection and production in the early US cotton textile industry." ''Journal of Economic History'' (1984) 44#4 pp. 1033–1045. * Bolt, William K. ''Tariff Wars and the Politics of Jacksonian America'' (2017) covers 1816 to 1861
PhD dissertation version
* Cohen, Andrew Wender. ''Contraband: Smuggling and the Birth of the American Century''. WW Norton & Company, 2015. * Dewey, Davis Rich. ''Financial History of the United States'' (5th ed. 1915
online full text
* Doran, Charles F. and Gregory P. Marchildon. ''The NAFTA Puzzle: Political Parties and Trade in North America'' (1994) * Eckes, Alfred. ''Opening America's Market: U.S. Foreign Trade Policy since 1776'' (1995) * Elliott, Orrin Leslie. ''The Tariff Controversy in the United States 1789–1833: With a Summary of the Period Before the Adoption of the Constitution'' (1892
online
*
Gingrich, Newt Newton Leroy Gingrich (; né McPherson; born June 17, 1943) is an American politician and author who served as the 50th speaker of the United States House of Representatives from 1995 to 1999. A member of the Republican Party, he was the U. ...
. "Trump's America: The Truth about Our Nation's Great Comeback" (2018) * Goodman, Matthew P and Ratner, Ely "A Better Way to Challenge China on Trade" Foreign Affairs, March 22, 2018 * Hawke, Gary R. "The United States tariff and industrial protection in the late nineteenth century." ''Economic History Review'' (1975) 28#1 pp. 84–99. * * * Irwin, Douglas A. "Antebellum Tariff Politics: Regional Coalitions and Shifting Economic Interests", ''Journal of Law and Economics,'' 51 (Nov. 2008), 715–42. * Lake, David A. "International economic structures and American foreign economic policy, 1887–1934." ''World Politics'' (1983) 35#4 pp. 517–543
online
* Kaplan, Edward S.; ''Prelude to Trade Wars: American Tariff Policy, 1890–1922'' Greenwood Press 1994 * Kaplan, Edward S. ''American Trade Policy: 1923–1995'' (1996)
online review
* Narton, John H. Judith L. Goldstein, Timothy E. Josling, and Richard H. Steinberg, ''The Evolution of the Trade Regime: Politics, Law, and Economics of the GATT and the WTO'' (2008) * Schattsneider, E. E. ''Politics, Pressures and the Tariff'' (1935). Passage of Hawley-Smoot tariff * Smith, Mark A. ''The Tariff on Wool'' 1926 * detailed political narrative; full text online * * Summers; Festus P. ''William L. Wilson and Tariff Reform, a Biography'' (1953) on 1890s * Taussig, F. W. ''The Tariff History of the United States''. 8th edition (1931)
5th edition 1910 is online
the standard scholarly history; it collects articles he wrote in the journals * Taussig, Frank William. ''The history of the present tariff, 1860–1883'' (1885
online
* * Taylor, George Rogers, ed. ''The Great Tariff Debate, 1820–1830'' (1953), excerpts from primary and secondary sources * Terrill, Tom E. ''The Tariff, Politics, and American Foreign Policy 1874–1901'' (1973). * Turney, Elaine C. Prange, and Cynthia Clark Northrup. ''Tariffs and Trade in U.S. History: An Encyclopedia'' (3 vol 2003); primary sources in vol 3 * Wolman, Paul. ''Most Favored Nation: The Republican Revisionists and U.S. Tariff Policy, 1897–1912'' (1992)


External links



from Northern Illinois University

from Northern Illinois University {{DEFAULTSORT:Tariffs In United States History History of foreign trade of the United States History of taxation in the United States History of international trade History of the United States by topic