The History of Tariffs in the United States
The history of tariffs in the United States is a long and evolving one, reflecting changes in economic policy, political ideologies, and international trade relations. Here is an overview of key phases in U.S. tariff history:
1. The Early Republic & Protective Tariffs (1789–1860)
Tariff Act of 1789: One of the first major laws passed by Congress, imposing tariffs to generate revenue for the new Federal government and to protect American industries.
Imposed a 5% tax on most imports
Imposed higher rates on specific goods
Levied a 50¢ per ton duty on goods imported by foreign ships
Levied 6¢ per ton on American-owned vessels
Sponsored by James Madison
A key part of Alexander Hamilton's economic strategy
The first major piece of legislation passed in the United States after the ratification of the United States Constitution
Hamilton's Economic Plan: Alexander Hamilton advocated for tariffs to support domestic manufacturing. It should be noted that Hamilton was a Centrist who ideologically believed in a powerful Central Government. Hamilton’s ideology was in stark contrast to Jefferson’s decentralized ideology (my personal ideology), which was to allocate the preponderance of power to the States rather than to a centralized body, which eventually would work to perpetuate itself at the expense of the States (i.e. the people).
Assumption of state debts: The Federal government would pay off state debts which helped position the U.S. as a desirable place for foreign investors to invest.
Bank of the United States: Modeled after the Bank of England, this bank would issue paper money, store government funds, and make loans.
Tariffs: These taxes on imports were designed to protect American manufacturers from foreign competition.
Subsidies: The government would give subsidies to American industries.
Internal improvements: The government would improve transportation and infrastructure.
Tariff of 1816 - the Dallas Tariff:
The Tariff of 1816 was a 25% tax on all wool and cotton goods imported into the United States from foreign nations. This provided the United States with a budget surplus and helped the country continue the process of industrialization.
The Dallas Tariff was the first explicitly protective tariff, aimed at shielding U.S. industry from British competition.
The bill was part of a solution to avoid a projected federal deficit reported by Secretary of the Treasury Alexander J. Dallas. The Dallas Tariff was approved on April 27, 1816, as a temporary measure and was authorized for only three years.
Tariff of Abominations (1828): The Tariff of Abominations was a protective tariff passed in 1828 that taxed imported goods to help American manufacturers.
The tariff was unpopular in the American South, where it was seen as a threat to their economy.
The tariff led to the Nullification Crisis of 1832–1833 and foreshadowed the eventual secession of the South in 1860–1861.
Walker Tariff (1846): Marked a shift toward lower tariffs under Democratic leadership.
The Walker Tariff was a set of lower import duties that reduced tariffs on imported and exported goods. The Walker Tariff lowered the tariff rate from 40% to 25%.
The tariff was named after Robert J. Walker, the United States Secretary of the Treasury at the time.
2. Civil War and Post-War Industrial Growth (1861–1913)
Morrill Tariff (1861): The Morrill Tariff was passed on March 2, 1861, during the administration of President James Buchanan. It raised tariffs to fund the Civil War and support industrialization. Customs revenue from tariffs totaled $345 million from 1861 to 1865, or 43% of all Federal tax revenue, but military spending totaled $3.1 billion.
Representative Justin Smith Morrill of Vermont sponsored the tariff. Morrill was a financial conservative who also championed "sound" currency.
The Morrill Tariff raised the average dutiable ad valorem tax on imports from just under 20 percent in 1860 to an average of over 36 percent in 1862, with dutiable rates scheduled to go to 47 percent within three years.
Gilded Age Tariffs: High tariffs (like the McKinley Tariff of 1890) protected American manufacturers but were opposed by farmers and consumers. The McKinley Tariff of 1890 increased import taxes to nearly 50% on average. The goal was to protect American industries and jobs from foreign competition.
The McKinley Tariff was a major issue in the 1890 elections, which resulted in a Democratic victory.
The McKinley Tariff was drafted by Representative William McKinley, who chaired the House Ways and Means Committee. It was signed into law by President Benjamin Harrison (23rd U.S. President), on October 1, 1890.
Dingley Tariff (1897): Further increased rates, marking a period of protectionism. The Dingley Tariff was the highest tariff in U.S. history, averaging approximately 52% in its first year of operation. The rate averaged approximately 47% over the life of the tariff.
3. Progressive Era & Move Toward Free Trade (1913–1930)
Underwood Tariff (1913): Reduced tariffs significantly, reflecting Woodrow Wilson’s push for lower trade barriers.
The Underwood Tariff lowered average tariff rates from approximately 40% to around 27%.
The bill also established a federal banking system to oversee tariffs.
The bill was named after Oscar W. Underwood, a Republican Representative from Alabama, and Furnifold Simmons, a Democratic Senator from North Carolina.
World War I (1914–1918): Tariffs became less of a focus as war needs took priority.
4. The Great Depression & Protectionism (1930–1945)
Smoot-Hawley Tariff (1930): Raised tariffs on hundreds of imports, worsening the Great Depression by triggering retaliatory tariffs from other nations.
The law was sponsored by Senator Reed Smoot of Utah and Representative Willis Hawley of Oregon. President Herbert Hoover signed it into law on June 17, 1930.
The law increased tariffs on agricultural imports and over 20,000 other imported goods.
It led to a 65% decline in global trade.
Reciprocal Trade Agreements Act (1934): The Reciprocal Trade Agreements Act (RTAA) of 1934 was a law that allowed the President to negotiate trade agreements with other countries. The RTAA was part of President Franklin D. Roosevelt's New Deal efforts to help the U.S. recover from the Great Depression.
The Constitution gives Congress the right to regulate foreign commerce and establish tariff rates. Under the RTAA, Congress granted the President the right – on a temporary basis, subject to renewal after three years – to decrease or increase U.S. tariffs by up to 50% of the levels set by the 1930 Smoot-Hawley Tariff in exchange for tariff concessions by other countries.
Such tariff reductions would be brought into force through executive agreements, rather than treaties requiring Senate approval.
Critics of the RTAA believed it gave too much power to the President and took power away from Congress.
Between 1934 and 1939, the Roosevelt Administration concluded trade agreements with 19 countries under the Reciprocal Trade Agreements Act: Belgium, Brazil, Canada, Colombia, Costa Rica, Cuba, Czechoslovakia, Ecuador, El Salvador, Finland, France, Guatemala, Haiti, Honduras, the Netherlands, Nicaragua, Sweden, Switzerland, and the U.K.
The tariff negotiating process created by the RTAA program provided the model for the General Agreement on Tariffs and Trade (GATT), which was the agreement signed by 23 countries in 1947 that has provided the framework for multilateral trade liberalization in the post-WWII era.
5. Post-WWII Globalization & Free Trade (1945–2000)
General Agreement on Tariffs and Trade (GATT, 1947): The General Agreement on Tariffs and Trade (GATT) was an agreement between countries to reduce trade barriers. GATT was signed in 1947 and was one of the first international attempts to reduce trade barriers.
How it worked: GATT functioned as an organization that conducted rounds of talks and resolved international trade disputes.
The Uruguay Round, which was completed in 1993, resulted in the creation of the World Trade Organization (WTO).
Reduced average tariffs on the world's industrial goods from 40 percent of their market value in 1947 to less than 5 percent in 1993.
Reduced agricultural subsidies.
Trade Expansion Act (1962): Gave the President more authority to lower tariffs.
The President could cut tariffs by up to 50% over five years.
The President could eliminate tariffs on certain goods.
Section 232: Allows the Secretary of Commerce to investigate the effect of imports on national security. President Trump used Section 232 to impose tariffs on steel and aluminum in an effort to support U.S. industry.
NAFTA (1994): The North American Free Trade Agreement (NAFTA) went into effect on January 1, 1994. It was an agreement between the United States, Mexico, and Canada to eliminate trade barriers and create a free-trade zone.
NAFTA immediately eliminated tariffs on most goods between the three countries.
NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020. The United States-Mexico-Canada Agreement (USMCA) went into effect on July 1, 2020.
USMCA: New provisions for digital trade, including intellectual property protection.
6. 21st Century: Tariff Wars & Protectionist Policies (2000–Present)
China's WTO Entry (2001):
China officially joined the World Trade Organization (WTO) on December 11, 2001, after 15 years of negotiations.
Led to a significant reduction in tariffs on Chinese goods, increasing trade but also led to industrial job losses in the U.S.
Trump Tariffs (2018–2020): Imposed tariffs on Chinese goods and steel/aluminum, sparking a trade war.
Biden Administration (2021–Jan. 20th 2025): Maintained many Trump-era tariffs but sought to balance protectionism with global trade partnerships.
Second Trump Administration (Jan. 20th 2025 - Present): Trump restored section 232 tariffs on February 11th 2025.
Trump signed proclamations to close existing loopholes and exemptions to restore a 25% tariff on steel and elevate the tariff to 25% on aluminum.
Argentina, Australia, Brazil, Canada, Japan, Mexico, South Korea, the European Union, Ukraine, and the United Kingdom had previously received exemptions.
Tariffs in the U.S. have historically fluctuated between high protectionism and free trade. Tariffs remain a key tool in economic and geopolitical strategy, particularly in competition with China.