Tariffs have been a major point of debate with the reelection of President Donald Trump, who campaigned on enacting heavy tariffs on the United States’ major trading partners. While the effects of Trump’s tariffs have yet to be fully realized, American tariffs are a complex financial tool with a history that stretches back to the birth of the nation. When Alexander Hamilton was appointed the first American Secretary of the Treasury, tasked with building a national financial system, tariffs were a central aspect of his economic policy. By placing heavy import fees on imported goods, he aimed to protect and infant American manufacturing operations while generating revenue for the expanding Federal government. However, with the limited tracking from the time the success of these measures is unclear; according to the Fordham Journal of Corporate and Financial law, Hamilton’s tariffs went on to generate a considerable portion of the federal budget. The Cato Institute, by contrast, found no definitive connection to the tariff and national budgetary gain. Regardless of exact knowledge of their impact, tariffs saw continued use as a component of the USA’s protectionist policies.
Protectionism motivated most tariffs. While they generate revenue they also shelter American industries from competition, running counter to belief in free trade and innovation through competition. Isolationist economic ecosystems can emerge. The tariff of 1890, known more commonly as the McKinley Tariff, boosted the protective tariff rates nearly 50% on average on many American products like tin plates and wool. William McKinley was known by some as the Napoleon of Protectionism, as he heavily supported the 1890 tariff and campaigned on protectionism in 1896. In the 1896 election, giants of American industry donated most of the $10,000,000 that made up McKinley’s campaign fund. His opponent, grassroots populist William Jenning Bryan, only raised $300,000. This was the first US election with major corporate influence, and many believe that McKinley’s corporate sponsors were the primary drivers for his tariff policies, as their manufacturing empires would gain from foreign goods increasing in price.
Protectionism and isolationism remained as popular policy through the 20th century, and even after the excessively punitive Fordney-McCumber Tariff in 1922 prompted retaliation from European nations, the booming American economy of the 1920s shrugged off the damage. The tariff placed an even heavier burden on Europe, who were struggling to rebuild their economies after Versailles. Tariffs remained or rose towards the end of the decade, and in 1928 Herbert Hoover was elected on a campaign espousing isolationism and protectionism. When the stock market crashed in 1929, the Smoot-Hawley tariff was passed one year later and increased the already exceptionally high tariffs. The policy added intense strain to the fragile global economy, and the import duties are seen as a direct factor in the 66% reduction in global trade seen between 1929 and 1932.
If efforts to climb out of the great depression weren’t the death of isolationism and protectionism, World War II and its aftermath were. The war necessitated open cooperation with European nations and out of the other side came a historic economic surge in America, causing a turnaround in attitude adopted by most major economists. As the war ended the General Agreement on Tariffs and Trade was introduced in Europe, foreshadowing a free market resurgence. For decades tariffs seemed lessened in importance as free trade dominated; Milton Friedman’s Capitalism and Freedom became requisite reading. Tariffs were sidelined to grow American soft power and promote diplomatic connectivity, with one of few exceptions coming from Ronald Reagan’s 100% punitive tariff on Japanese-imported electronics; specifically, 16 or higher bit computers.
Tariffs have seen extensive use throughout American history, and are undeniably complex in their effects on both domestic and foreign economies. While they had fallen out of popularity, Donald Trump’s promises of high tariffs were seemingly a key contributor to his victory in 2024. As the enforcement of the tariffs he attempted to place on China, Mexico, and Canada have been postponed, it will likely be years until estimates can be made about the impact Trump’s tariff policies will have on the world economy. Whatever the outcome, tariffs have existed since America’s founding, and they’re here to stay.
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