History of tariffs in the United States
s have historically played a key role in the trade policy of the United States. Economic historian Douglas Irwin classifies U.S. tariff history into three periods: a revenue period, a restriction period and a reciprocity period. In the first period, 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 rose to 50 percent and remained at that level for several decades. From 1934 onwards, in the "reciprocity period", the average tariff declined substantially until it leveled off at 5 percent. Especially after 1942, the U.S. began to promote worldwide free trade. After the 2016 presidential election, the US increased trade protectionism.
According to Irwin, tariffs were intended to 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."
According to Irwin, a common myth about U.S. trade policy is that low tariffs harmed American manufacturers in the early 19th century and then that high tariffs made the United States into a great industrial power in the late 19th century. As its share of global manufacturing powered from 23% in 1870 to 36% in 1913, the admittedly high tariffs of the time came with a cost, estimated at around 0.5% of GDP in the mid-1870s. In some industries, they might have sped up development by a few years. However, U.S. economic growth during its protectionist era was driven more by its abundant resources and openness to people and ideas.
Tariff revenues
The evolution of U.S. tariff policy from 1790 to 2019 can be divided into three distinct periods, each characterized by a different primary objective: revenue generation, import restriction, and reciprocity through trade agreements. During the revenue period, average tariffs increased from approximately 20% to 60%, before declining again to around 20% by 1860. In the subsequent restriction period, the average tariff on dutiable imports rose to roughly 50% and remained at that level for several decades. Beginning in 1934, the reciprocity period marked a sharp decline in tariff rates, which eventually stabilized at approximately 5%, a level that has persisted into the 21st century.Many of the fluctuations in average tariffs over time were not the result of deliberate policy shifts, but rather due to changes in import prices interacting with “specific duties”—fixed dollar amounts per unit of quantity, rather than percentages of import value. For example, price increases during World War I and deflation during the Great Depression produced temporary spikes and dips in the average tariff level. A significant drop in tariffs following World War II was largely driven by inflation: roughly two-thirds of the decline between 1944 and 1950 resulted from rising prices, and one-third from tariff reductions negotiated at the first GATT conference in 1947.
Although the average tariff on dutiable imports has fluctuated considerably over time, the underlying tariff rates set by policymakers have been more stable than the raw data might suggest. These rates are typically structured to reflect the overarching goals of revenue generation, import restriction, or trade reciprocity.
Colonial Era and American Revolution
Trade policy was a subject of controversy even prior to the independence of the United States. The thirteen North American colonies were subject to the restrictive framework of the Navigation Acts, which directed most colonial trade through Britain. Approximately three-quarters of colonial exports were enumerated goods that had to pass through a British port before being reexported elsewhere, a policy that reduced the prices received by American planters.Scholars have long debated whether British mercantilist policies primarily benefited British shipping interests at the expense of the colonies, thereby contributing to the tensions leading to the American Revolution. In an early estimate, Harper calculated that these trade restrictions cost the colonies about 2.3% of their income in 1773. This estimate excludes potential benefits of imperial membership, such as reduced defense costs and lower shipping insurance rates due to Royal Navy protection. Nevertheless, British mercantilist restrictions are generally considered to have played a role in colonial demands for independence. It is estimated that about 90% of the economic burden imposed by the Navigation Acts fell on the southern colonies, particularly tobacco growers in Maryland and Virginia, potentially reducing regional income by up to 2.5% in 1770 and contributing to support for independence.
Available data from the era indicate that American foreign trade declined sharply during the Revolutionary War and remained subdued into the 1780s. Trade revived during the 1790s but remained volatile due to ongoing military conflicts in Europe.
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 federal revenue and in light of concerns over the trade balance, the First United States Congress passed, and President George Washington signed, the Hamilton Tariff of 1789, 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.
There was a consensus among the Founding Fathers that tariffs were the most efficient way of raising public funds as well as the most politically acceptable. Early sales taxes in the post-colonial period were highly controversial, difficult to enforce, and costly to administer. This was evident during events like the Whiskey Rebellion, where the enforcement of sales taxes led to significant resistance. Similarly, an income tax did not make sense for numerous reasons, particularly due to the complexities of tracking and collecting it. In contrast, tariffs were a simpler solution. Imports entered the United States primarily through a limited number of ports, such as Boston, New York City, Philadelphia, Baltimore, and Charleston, South Carolina. This concentration of imports made it easier to impose taxes directly at these points, streamlining the process of collection. Furthermore, tariffs were less visible to the general public because they were built into the price of goods, reducing political resistance. The system allowed for efficient revenue generation without the immediate visibility or perceived burden of other tax forms, contributing to its political acceptability among the Founders.
In December 1791, Treasury Secretary Alexander Hamilton presented his Report on Manufactures to Congress. The presented both a theoretical defense of domestic industrial development and a set of concrete policy proposals. Hamilton recommended measures such as increased import duties on finished goods, reduced duties on raw materials, production subsidies for key industries, and government support for the immigration of skilled labor.
Economic historian Douglas Irwin argues that Alexander Hamilton’s protectionist reputation is often overstated. While Hamilton is commonly associated with high tariffs due to his Report on Manufactures, Irwin notes that the report is “much more nuanced than is commonly portrayed.” Although Hamilton supported the promotion of domestic manufacturing at a time when the United States had little industrial development, he favored “subsidies and encouragements to invest rather than high tariffs” and believed that tariffs were not particularly effective in fostering industrial growth. According to Irwin, Hamilton aimed to support manufacturing without necessarily shielding it from foreign competition, recognizing that excessive protection could lead to inefficiency and reduce overall trade. Irwin emphasizes the importance of historical context, pointing out that the United States had just emerged from war with Britain and was still predominantly an agricultural society with very different conditions than in later centuries.
Ashley notes that:
President Thomas Jefferson initiated an unprecedented policy experiment by enacting a complete embargo on maritime commerce, with Congressional support, beginning in December 1807. The stated objective of the embargo was to protect American vessels and sailors from becoming entangled in the Anglo-French naval conflict. The embargo was enacted through the Embargo Act of 1807, and later modified by the Non-Intercourse Act of 1809, which restricted trade only with Britain and France. Imports declined sharply, causing shortages and price increases for various goods. While intended as a measure of economic coercion, the embargo primarily harmed domestic commerce and became widely unpopular. By mid-1808, the United States had reached near-autarkic conditions, representing one of the most extreme peacetime interruptions of international trade in its history. The embargo, which remained in effect until March 1809, imposed significant economic costs. Irwin estimates that the static welfare loss associated with the embargo was approximately 5% of GDP.
The War of 1812 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.
Tariffs were significantly raised with the Tariff of 1828. It was called the Tariff of Abominations by its Southern detractors because of the effects it had on the Southern economy. It set a 38% tax on some imported goods and a 45% tax on certain imported raw materials. 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. President Andrew Jackson 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%.