United States Tariffs

I

Introduction

United States Tariffs. Throughout the history of the United States, tariffs have influenced the nation's economics and politics. Tariffs are taxes levied on imports and exports by a government.

Before the formation of the United States, customs duties were imposed by Great Britain on colonial commerce and were levied by almost all the colonial assemblies, virtually from their inception. The colonial imposts, generally duties of 1 to 5 percent, were intended to raise revenue; protect colonial trade against foreign, including British, competition; retaliate against discriminatory treatment abroad; and, in accordance with custom and prevailing religious beliefs, notably in the northern colonies, discourage the purchase of ostentatious apparel and liquor. Most colonial imposts comprised either general tariff schedules that included import duties on wine and liquors, or such specific taxes as export duties on tobacco or other agricultural products, import duties on slaves, and tonnage duties on shipping based on the weight of the cargo. See also Foreign Trade.

The Constitution of the United States empowered Congress in Article I “to lay and collect Taxes, Duties, Imposts and Excises” and “to regulate Commerce with foreign Nations.” The first enactment made by Congress was the Tariff Act of 1789, which was intended to encourage the domestic manufacture of glass, earthenware, and other products. Its primary purpose, however, was to raise revenue; it provided for an average duty rate of about 8.5 percent.

II

Protectionism

Protection as a foreign-trade policy was defended as a necessity of a strong national government and was opposed by those who, like Thomas Jefferson, were anxious to have a minimum of government and of governmental interference. The foremost American protectionist was Alexander Hamilton; as secretary of the treasury in the cabinet of President George Washington, he submitted a Report on Manufactures to Congress in December 1791. Hamilton's report remains one of the most important documents in the literature of protection. He argued in favor of a moderate protective policy, designed to build up within the country all the industries necessary to ensure national independence and the most rapid development of natural resources. He also emphasized his conviction that industrial independence is indispensable to continuous political independence.

---

---

In the years immediately following the submission of Hamilton's report, the situation was so favorable to the development of the U.S. shipping industry that little attention was given to the question of protection. The Napoleonic Wars made shipping under the flag of a European state hazardous and gave the United States the major share of the world's carrying trade because it was the only important neutral country. During the early stages of the war, American shipping and commerce flourished, but the situation changed abruptly when, in 1806 and 1807, France proclaimed a blockade of the British Isles; Britain retaliated by imposing a blockade of all important European ports, thus depriving American merchant vessels of their previous immunity. The United States then retaliated with the Embargo Act of 1807 and the Non-Intercourse Act of 1809, which led finally to the War of 1812. American agriculture, shipping, and related industries suffered disastrous declines in consequence of these difficulties, and the United States was forced to produce for itself nearly all the commodities it required.

III

The Tariff Act of 1816

The first complete protective tariff was adopted by the United States in 1816; it was principally intended to foster the production of textiles, hats, leather, paper, and cabinetwork. The act was defended more as a means of protecting those industries established during the Napoleonic Wars (1799-1815) and the War of 1812 than as a means of promoting new industries. In fact, the highest duties provided were to remain in force only three years on the assumption that American manufacturers would then be adjusted to the conditions of peace and able to hold their own against foreign competitors. The erroneousness of this view was soon demonstrated, and demands for the protection of other industries, notably by manufacturers of wool and hemp products, glassware, and iron and lead products, led to a general upward revision of the tariff in 1824. Because that tariff resulted in higher prices of articles used in the agricultural South, it was bitterly denounced by representatives of the southern states.

IV

The Tariff of 1828 and Later Crisis

Demands on the part of wool manufacturers for greater protection led to the tariff of 1828; it provided for the highest rates to date and was later popularly called the Tariff of Abominations. Persistent agitation against the tariff of 1828 resulted in the enactment in 1832 of a law that established rates approximating those of 1824. South Carolina, however, was not appeased and declared null and void the tariff acts of both 1828 and 1832. The ensuing political crisis threatened to disrupt the Union, and President Andrew Jackson threatened to use force to compel the submission of South Carolina (see Nullification). A clash was averted when Congress adopted the so-called compromise tariff of 1833, introduced by the statesman Henry Clay. He advanced the so-called home-market argument, which was designed to reconcile the interests of the agricultural South and West with those of the manufacturing North. The argument rested on the proposition that the prosperity of the American farmer depends on a regular and constant market for products and that such a market is to be obtained only by building up manufacturing centers within the country. The act of 1833 provided for a gradual reduction of certain high customs duties until 1842. For a time these reductions were made, but after national revenues were seriously reduced as a result of the economic crisis of 1837, tariff rates were increased; the level of duties established by the Tariff Act of 1842, sponsored by the Whigs (see Whig Party), was approximately that of 1832.

In the administration of President James K. Polk the Democrats achieved control of national legislation. In 1846 they instituted a tariff that was frequently, but not entirely accurately, called a free-trade tariff. This tariff protected various industries with duties averaging about 30 percent. Congress again lowered customs duties in 1857, but before they became effective, economic crises led to their reinstatement.

	More from Encarta
	•  7 tips for funding an online degree •  How to succeed in the fashion industry without being a top designer •  Presidential Myths Quiz •  Coffee break: Recharge your brain