A Brief History of US Tariffs

President Trump says he wants to be “The Tariff President,” fully embracing a longstanding and powerful tool in the economic arsenals of nations. 

And with recent tariff threats by Trump against Canada, Mexico, and China, and more recently an announcement of a 25% tariff on steel imports, the history of tariffs in the United States is being updated before our eyes as our business-minded president flexes his tariff muscles as a prime negotiating tactic, promising to strong-arm other countries into doing his bidding and protecting American business. 

But do they work? It isn’t surprising that a president who built a global brand on being a shrewd dealmaker, and then was re-elected in one of the most culturally significant political comebacks in American history, would embrace tariffs as an economic weapon. 

But tariffs drive up prices in multiple ways. Scenario A is that a producer continues selling their goods to the same foreign customers, but now they start charging more to make up for the cost of the tariff. Scenario B is that the producer entirely abandons those customers and takes their business elsewhere, which reduces supply, pushing up prices. Either way, consumers are the ones who pay the tariffs in the end, not producers.

As Peter Schiff recently said on X (formerly Twitter) about Trump’s latest tariffs, targeting steel:

“Trump imposed 25% tariffs on steel and aluminum imports. That means not only will steel and aluminum cost Americans 25% more, but everything that American companies manufacture or build that requires steel or aluminum, such as cars, aircraft, appliances, & houses will cost more.”

19th Century: Restricting European Influence

The 19th century was marked by several pivotal tariff acts. The Tariff of 1816, called The Dallas Tariff, was enacted to shield burgeoning U.S. industries from British goods after the War of 1812. It hoped to stimulate domestic manufacturing but also sparked a major North-South economic divide, as the Southern states, heavily reliant on exports, opposed it. Critics of Trump’s tariffs say the same — we’re too dependent on goods from Canada, Mexico, and China to impose tariffs. The policy could drive up prices on everything from consumer goods to building materials.

The infamous Tariff of 1828, known as the “Tariff of Abominations,” increased duties significantly on European and especially British products, and helped lead to the Nullification Crisis. South Carolina declared these tariffs void within its borders, creating a powder keg in the American South, which was more dependent than the north on imported goods. 

It underscored the continuing tension between states’ rights and federal power that culminated, ultimately, in the Civil War. The conflict illustrated how tariffs could be politically explosive not only in terms of igniting Trade Wars with the countries they target—but how tariffs can also foster destructive civil conflict within the US itself. 

Next, the Morrill Tariff of 1861 arrived. Sponsored by conservative lawmaker Justin Smith Morrill, it was the “America First” tariff of its time, hoping to boost the domestic economy by encouraging domestic consumption. The Morrill Act also designated land to be sold by the states to fund public colleges, including historically Black colleges and universities. 

It passed just before the Civil War, aiming to protect the industrial North while cutting off revenue to the secessionist South as the more agricultural southern states declared their independence from the north as The Confederate States of America.

20th Century: Tariffs and Postwar Neoliberalism

Entering the 20th century, the U.S. maintained high tariffs with the Fordney-McCumber Tariff of 1922, signed into law by Herbert Hoover. Its purpose was to protect American farmers, but predictably led to other countries raising taxes on US imports.

Next came the Smoot-Hawley Tariff of 1930, which raised U.S. tariffs to historically high levels. Meant to protect skeptical American businesses from foreign competition in response to the economic downturn after World War I, the Smoot-Hawley Tariff is often cited as exacerbating the Great Depression by sparking a Trade War. It led to a cycle of retaliatory tariffs worldwide, leading to a sharp decline in global trade. Some critics of Trump’s protectionist tariff policy have suggested that we should expect a similar outcome, with countries passing tariffs to outdo each other and a global recession as the result.

Post-World War II, the landscape shifted with the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947, which aimed to reduce tariffs and other trade barriers. This move towards liberalization was seen as a commitment to prevent the economic nationalism that had led to war and economic instability. The U.S. engaged in several rounds of tariff reductions, notably during the Kennedy and Uruguay Rounds, which paved the way for the World Trade Organization (WTO). 

These measures decreased protectionism and removed trade barriers between nations. But they also made great strides toward further centralizing the global economy into a command-and-control system, with a select few given access to the levers, and providing new avenues for neoliberal corporatist oligarchs to subvert democracy by embedding themselves seamlessly into the basic functions of the system. Today we have many such examples of these neoliberal institutions serving a fundamentally undemocratic function and, despite the pretenses of democracy in countries like the US, rule through ebbs and flows of global finance, corporate boardrooms, and the incentive structures therein.

But are tariffs the answer to an increasingly unelected, unaccountable network of global institutions slowly chipping away at the sovereignty of nations? Markets are clearly wary regarding the history of US tariffs: Trump’s wave of tariff threats have come with a wave of bullish sentiment and new all-time highs for gold as investors flee to safety from uncertainty, buying the yellow metal to protect themselves. While gold dropped momentarily due to investors assuming a further pause for the Fed’s rate cuts, it surged again soon after:

Gold vs USD 1-Month

However, tariffs don’t cause inflation. Out of control deficits and loose monetary policy do. Tariffs push up the cost of goods in other ways, but they can lower the cost of services due to decreases on the demand side. As Peter Schiff wrote on X:

“…when Americans are forced to pay higher prices for the goods they need, they have less left over for services they want. Reduced demand for services will result in lower prices for those services.”

Trump’s re-election underscores American fears, which have festered and grown for years, that undemocratic neoliberal institutions have gained too much power. The current tariff measures echo the protectionist strategies of the 19th and early 20th centuries. While such policies can offer short-term protection to domestic industries, history shows that they often lead to higher consumer prices and strained international relations. 

Free trade means free people. Restricted trade means restricted people. It’s one reason that protectionist economic policies often help contribute to downturns and make existing economic problems worse. It’s also part of the reason that tariffs against other countries often backfire on the country of origin. They also underscore the ever-present pattern in economic history wherein the more a government or other centralized party tries to control markets, the more it merely introduces inefficiencies as a result of the limits of human intervention to properly manage an infinitely-complex economic system.