Tariff duties (taxes on imported goods) designed to generate revenue for the government and, more importantly, to protect domestic U.S. industries from foreign competition.
Between 1789 and 1816, Congress passed numerous tariff bills designed to simply generate funds for the Federal Treasury, which was running a deficit. As early as 1791, Secretary of the Treasury Alexander Hamilton had proposed that Congress consider protective tariffs as a means of stimulating industry so that the country could become economically self-sufficient. Legislators rejected the idea at the time, but after the War of 1812 against Great Britain, Congress accepted Hamilton’s recommendations. The first protective tariff, passed in 1816, increased rates to 25 percent on wool, cotton, and manufactured iron; 30 percent on paper, leather, and hats; 20 percent on pig iron; and 15 percent on most other manufactured items. In addition, cheap Indian cotton was valued at a minimum cost of 25 cents per yard even though it was less expensive. Two years later, Congress raised rates again in response to Great Britain’s practice of dumping goods on the American market at below-cost prices. In 1820, after the panic of 1819 hit, Congress once again increased rates to help stimulate the economy. Duties rose on iron, sugar, molasses, coffee, and salt. By 1824, Congress had established a pattern of approving protective tariffs.
The Tariff of 1824 resulted in higher duties on glass and paper. Congress also added numerous items to the list including leather, beef, bacon, cheese, wheat, flour, and most building materials. By this time the tariff had developed into a sectional issue. The debate over the Tariff of 1828 led Southerners to oppose the measure along with the Northern states until Massachusetts Senator Daniel Webster threw his support behind an amendment to increase the rate on woolen goods to 45 percent. Congress passed the tariff, but Vice President John C. Calhoun drafted the South Carolina Exposition and Protest, which argued for South Carolina’s right to nullify the federal law if the hefty tariff proved detrimental to the people of South Carolina. The South Carolina legislature adopted the Exposition and issued a formal protest to the Senate demanding the reduction of rates. When Congress raised rates on most items again in 1832, South Carolina refused to collect the tariff duties and threatened secession. In 1833 President Andrew Jackson asked Congress to approve the Force Act, which would allow the use of military force if necessary to enforce U.S. laws. The Force Act reached Jackson’s desk on the same day as the Compromise Tariff of 1833, a compromise worked out by Speaker of the House Henry Clay that gradually reduced the tariff rate to 20 percent over a nine-year period. The country had narrowly avoided a conflict. At the end of the nine years, the U.S. government owed $11 million in debts, and Congress began raising rates once again. Rates did decline in 1846 with the passage of the Walker Tariff but quickly rose again. Although the tariff had created sectional differences, by the 1850s the primary political issue had shifted to the extension of slavery. The protective tariffs had guaranteed the survival of the wool and textile industries in New England, as well as other manufacturing concerns, but the economy still struggled.
When the Civil War broke out in 1861, the Northern Republicans in Congress quickly passed the Morrill Tariff, which raised rates to pay for the cost of the war. From 1861 until the end of the nineteenth century, Congress continued passing protective tariffs. With Republicans in the White House the entire time except for the two presidencies of Grover Cleveland, the Democrats had little hope of reducing rates. As the tariff barriers rose, foreign competition found it difficult to compete with domestic manufactures, especially as companies began forming trusts (organizations combining similar companies) that dominated the oil, steel, beef, and sugar industries as well as many other industries. The lack of competition from abroad created a situation that encouraged the monopolistic practices of industrialists John D. Rockefeller and Andrew Carnegie. The expansion of the enumerated list included many everyday household items. Democrats charged that the wealthy could bring in luxury items for free but salt and cotton were taxed at very high rates—big business continued to grow at the expense of the average citizen. When Woodrow Wilson took office in 1913, Democrats managed to reduce tariff rates, but the outbreak of World War I altered the situation. Throughout the 1920s rates remained high to protect American industry as Europeans once again sought to dump goods on the U.S. market. European nations, some of which were newly formed out of former empires after the war, raised tariff barriers against the United States and other countries to protect their own industries. Finally, after the stock market crash in 1929, the United States responded by raising rates to a record level with the Hawley-Smoot Tariff of 1930. After Franklin D. Roosevelt became president, Congress authorized the executive branch to negotiate reciprocal trade agreements with countries on an individual basis. Not until after World War II did the United States abandon protective tariffs and pursue a policy of free trade under the General Agreement on Tariffs and Trade (1947).
