A History of America’s Ever-Shifting Stance on Tariffs

More than 300 years before President Donald Trump declared his intention to protect American steel and slap severe levies on China, American colonists were grappling with their own serious concerns regarding trade policy—specifically that of Great Britain, the motherland. The Townshend Acts of the mid-1760s, which charged Americans substantial import duties for a range of goods the colonists desperately craved (glass, lead, paper, tea), were wildly unpopular, and brought about tensions that came to a head with the 1770 “Boston massacre” (drummed up in American news outlets to light a fire under citizens) and the Sons of Liberty’s notorious “tea party” in 1773.

“Taxation without representation”—including tariffs without representation—was one of the principal drivers of the American Revolution. After the colonies prevailed and coalesced into a bona fide nation of their own, the infant American government was understandably loath to implement taxes of any kind, lest it stir up fresh discord. Under the Articles of Confederation, the toothless forerunner to the Constitution, federal leadership had no power whatsoever to tax its citizens.

It very quickly became clear that this model was unworkable, and the Articles were done away with mere years after their ratification. Then, as the country grew and industrialized in the lead-up to the Civil War, and the challenges facing it increased in both scale and number, many policymakers started turning to tariffs for economic relief.

A striking memento from this uncertain period, a campaign medal from the 1844 presidential run of Henry Clay, resides in the collections of the National Museum of American History. During the 1844 race, which Clay (Whig) ultimately lost to rabid expansionist James Polk (Democrat), Clay incorporated a staunchly protectionist plank into his platform. The reverse side of the medal bears along its circumference the slogan “Champion of a protective tariff,” as well as a striking naval scene in which Smithsonian curator Peter Liebhold sees ample symbolism.

“It shows a freighter for world trade, of course,” he says, “and then below the ship is a plow with a sheaf of wheat draped over it. So it’s all about this notion of a tariff.” Understanding the nuance behind Clay’s epithet, though, and his context in a much larger antebellum debate over tariffs, demands a bit of historical backtracking.

One of the earliest and gravest blows to the fantasy of a tax-free American utopia was the War of 1812, which came along as the U.S. was expanding rapidly in both size and population to test the inchoate nation’s mettle. In the years leading up to the conflict, which pitted the United States against the British Empire once again, an inexperienced American federal government faced the music and accepted that it would need to put forward forceful fiscal policy if the republic was to endure on the world stage.

One drastic measure implemented in response to British aggressions was the Embargo of 1807, which imposed extremely harsh tariffs on manufactured imports across the board. The idea was to energize homegrown American industry, and to an extent, says Liebhold, it worked. “It was really good for the textile industry,” he says, “really the beginning of the manufacturing system in the United States.” Yet the severity of the embargo (mockingly rendered backwards as the “O grab me!” in political rags) rubbed many Americans the wrong way. Basic “things like copper became incredibly pricey,” Liebhold says. “Most cheap copper had been imported.”

Even after the war was resolved and the embargo lifted, it was clear that the welfare of domestic manufacturing would remain a hot-button issue in America amid the global push toward industrialization. Domestic production took an even more prominent place in American discourse due to an atmosphere of nostalgic romance that emerged in the early 19th century in response to the uncertainty of a new era in a new nation. A broad ideal of resourceful self-sufficiency gripped the land; in particular, advocates of simple, honest, Jeffersonian living championed local production of homespun textiles.

“As the roots of American culture are grounded in the self-sufficient rural household,” said Harvard historian Laurel Ulrich in a lecture, “lots of people who have been left behind by this new industrial world can begin to connect up with the national story.”

Many of these patriotic rural producers, however, were not manufacturers at all, but rather Southern farmers who lacked the access to industry enjoyed by Northern cities. With its focus on agriculture, Southern life necessitated a healthy amount of importation, so it was all but inevitable that a tariff conflict would erupt along North-South lines.

This contretemps broke out in earnest during the presidency of Andrew Jackson, whom detractors branded “King Andrew” for his expansive view of federal powers. In 1828, John Quincy Adams, Jackson’s predecessor, had signed off on a battery of massive tariffs (the tax rate was a whopping 38 percent for almost all imported goods) designed to promote Northern industry—causing uproar in the South. Adams attempted to calm the situation with a slightly more modest tariff, which Jackson signed into law in 1832, but it was no use. One state, South Carolina, was so furiously opposed to Jackson and Adams’s Northern-geared tariffs that it outright refused to comply with either. The “nullification crisis” was born.

Jackson, prideful and resolute in his belief in a supreme national government, met South Carolina’s defiance with a brash move of his own, securing passage of a “force bill” that would allow him to enforce tariff compliance with military troops deployed to the rebellious state. South Carolina threatened to withdraw from the Union entirely.

Enter South Carolina senator John C. Calhoun and “Great Compromiser” Henry Clay (Kentucky). In an effort to defuse the rapidly escalating state of affairs, the two prominent political voices jointly pitched a compromise tariff, not too different than the 1832 bill but notable for its promise to dial back the rates with each passing year of the next decade.

Fearful of the possibility of an armed engagement between Jackson’s federal forces and Carolina militiamen, Congress succeeded in getting the legislation to Jackson, whose signature brought the crisis to a close in 1833—at least temporarily. The ugly dispute had laid bare the deep divisions between Northern and Southern economics.

Part of the reason for Clay’s defeat at the hands of James Polk in the election of 1844—embodied in the Smithsonian’s “champion of a protectionist tariff” medal—was the fact that the Southern electorate was largely fed up with protectionism. The promises of the 1833 Compromise Tariff had fallen to the wayside soon after the bill’s passage, and complaints of economic damage to the South were mounting once again. In 1846, Polk signed the low-rate Walker Tariff, signaling to his Southern supporters his commitment to looking out for American agricultural society.

Tariffs remained low up to the Civil War. After the conflict—which saw more American deaths than any other war in history—the weary nation was met once again with the question of economic policy amid alarmingly rapid industrialization.

The young Republican Party, which had soared to influence in wartime, was closely associated with aggressive tariff policy. And so, with yet another swing of the pendulum, protectionism reigned in postbellum America.

“We imagine the Gilded Age and that era to be this period of untrammeled free capitalism,” says University of Georgia historian Stephen Mihm, “but in fact tariffs remained completely central to American economic policy.”

This spirit of economic isolation endured through the Roaring Twenties and up to the dawn of the Great Depression. The Smoot-Hawley Act, enacted in June of 1930 with the endorsement of President Herbert Hoover, is perhaps the most infamous protectionist measure in U.S. history. Intended to stem the bleeding of the 1929 stock market crash, the aggressive legislation—in the opinions of many leading economists—served only to worsen its international fallout.

Smoot-Hawley “slapped an enormous number of tariffs on a wide range of goods,” says Mihm, “all in the hopes of protecting domestic industries from foreign competition at this moment of intense price wars. It was a disaster for both the American economy and the global system of trade.”

Once the production stimulus of World War II rolled around and the international political tangle of the Cold War began to take shape in its wake, the stage was set for a shift in American as well as global tariff outlook—a shift in the direction of free trade.

“Free trade becomes enshrined gradually, and very haltingly, into the world economic order,” Mihm says. “And you have to see it as logical outgrowth of the new movement toward global institutions that would promote cooperation across national lines.” Amid the trumped-up ideological battle of capitalism vs. communism, it was in the best interest of America to extend its hand to allies in the economic sphere as well as the diplomatic and military spheres.

Liebhold contends that advancement in technology and a concomitant diffusion of industry also played a key role in the upsurge of free trade. “Approaches to manufacturing really change in the mid-20th century,” he says. “Transportation becomes incredibly cheap and incredibly fast, so you can start moving goods all around the world. Production ceases to be very localized.” Whereas once a particular product derived clearly from a single place, now products were strange conglomerates of components fabricated in several scattered locales. “Where a product is made is extraordinarily vague,” Liebhold says.

It was this sort of cooperative atmosphere that gave rise to the General Agreement on Tariffs and Trade (GATT) in 1947, and to its more sweeping and better implemented post-Soviet descendant, the World Trade Organization (WTO), in 1995.

Republicans, once the party of unwavering protectionism, came to establish themselves as the free trade party over the span of the Cold War. “And Democrats in the postwar era,” Mihm says, “become increasingly associated with tariffs and protectionism—specifically, calls for protectionism driven not by industry, which it had been before, but by labor unions wary of competition from Japan and Taiwan.” China soon came to be seen as a threat as well.

Starting around the administration of President Bill Clinton, Mihm notes, the two factions actually managed a state of uneasy harmony. “For a couple decades,” he says, “there’s this bipartisan consensus for the most part about the virtues of free trade.” It was widely acknowledged that in a globalized, digital era, free trade had to be the policy baseline. “The Democrats were less enthusiastic,” Mihm says, “but nonetheless willing to embrace it” with the centrist push from Clinton.

President Trump, though, has set out to reconfigure America’s attitude toward tariffs in a fundamental way. Having aggressively targeted coal and steel workers in his 2016 “Make America Great Again” campaigning, Trump is now attempting to make good on his vows to protect American industry with outsized tariffs on steel and aluminum and vindictive levies aimed specifically at Chinese goods. This policy stance flies in the face of not only Clinton-era bipartisanship, but also the decades of Republican anti-tariff rhetoric that preceded it.

What will result from Trump’s combative proclamations is unclear—perhaps he will dial back his threats in response to lobbying within his government or overtures from abroad. But if he is serious about his professed “trade wars are good” mentality, we could be in for a major sea change.

“Certainly Trump is fracturing the consensus around free trade that once existed,” says Mihm. “Whether he’s the messenger or the architect of that fracture, I don’t know. This has clearly been building for years, and it has shocked the American political system.”

Whatever course U.S. tariff policy takes next, it is sure to remain a hotly debated topic in the years to come. “Arguments and discussions of tariffs have been important in the United States throughout its entire history,” says Liebhold, “and there has been no clear one best way.”

Ryan P. Smith | READ MORE

Ryan graduated from Stanford University with a degree in Science, Technology & Society and now writes for both Smithsonian Magazine and the World Bank's Connect4Climate division. He is also a published crossword constructor and a voracious consumer of movies and video games.