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Tariffs

Commercial restrictions through tariffs have been an integral part of American history. The federal government has used forms of commercial restriction as a source of revenue and to protect American industry and labor.  Before the Civil War, the federal government obtained close to ninety percent of its revenue from tariffs, and because of this, the government avoided income taxation.

Americans have used protective and revenue tariffs. Protective tariffs help new American industries compete with established foreign industries. Proponents of protective tariffs claim that all segments of America benefit from tariffs. Foes of protective tariffs argue that protective tariffs help a few interests at the expense of many. By barring foreign goods from American markets, American manufacturers can charge whatever price they want for their goods and force American consumers to pay exorbitant prices. Conversely, revenue tariffs are used to provide the government with revenue and offer only incidental protection to industries.

The Articles of Confederation did not grant Congress the power to enact tariffs. In the spring of 1781, with the outcome of the Revolution undecided and the nation heavily in debt, Congress asked the thirteen states for the power to levy an impost. North Carolina was among the first states to grant Congress the power because Tar Heels preferred an impost to a tax on land. Furthermore, North Carolina had few ports from which they could collect duties on imports. Despite the efforts of its supporters, the impost never became law.

Some scholars have suggested that the Founding Fathers replaced the Articles with the Constitution of 1787 because of the commercial flaws of the Articles. In the new federal constitution, Congress obtained the power “to lay and collect taxes, duties, imposts, and excises.” One of the first pieces of legislation that the first Congress passed was the tariff of 1789. Most imported goods received a duty of only five percent ad valorem (in proportion to the value) under this tariff.

The Republican Party of Thomas Jefferson showed little interest in the tariff.  During the War of 1812, the British navy prevented goods from coming to American shores. As a result, Americans manufactured their own products. To protect infant manufacturers, Congress passed the nation’s first protective tariff: the tariff of 1816.  Average duties stood at around twenty-five percent ad valorem. Every North Carolina Congressmen voted against this measure.

Congress attempted to raise tariff levels with the Baldwin Tariff of 1820 but failed by a single vote in the Senate. Lemuel Sawyer was the only Tar Heel to support this tariff in Congress. In 1824, Speaker of the House Henry Clay argued that a protective tariff would increase the national wealth. It would also create a home market where agricultural prices and wages increased.  P. P. Barbour first argued that a protective tariff was unconstitutional. The bill passed by only five votes in the House and four in the Senate. The distribution of the vote revealed that the tariff had become a sectional issue. Every North Carolina Congressmen opposed the tariff in 1824. Importers now paid duties of about thirty-five percent ad valorem.

Some manufacturing interests claimed that the tariff of 1824 did not offer them enough protection. They successfully passed the tariff of 1828, which southerners branded as the “tariff of abominations.” Once again, every North Carolina Congressmen disproved of a tariff bill. Average import rates now stood close to fifty percent.

Opponents of the tariff in South Carolina nullified this tariff and the subsequent tariff of 1833, which lowered average duties to about thirty three percent ad valorem. President Andrew Jackson equated nullification with treason and talked of hanging his own vice president, John C. Calhoun, whom he held responsible for the crisis over the tariff. At the end of 1832, Calhoun resigned the vice presidency and returned to Washington, D. C. as a Senator. There, he helped pass a compromise tariff that gradually lowered duties over the span of ten years with the sharpest cuts coming after 1840. Every North Carolina Congressmen endorsed the compromise tariff.

Few in North Carolina supported the doctrine of nullification but most agreed with South Carolina over the unconstitutionality of a tariff. The state legislature concurred with Jackson and called nullification a “revolutionary” and “subversive” doctrine. Some of the leading proponents of states’ rights in the state such as Willie P. Mangum, however, broke with Jackson over his handling of the crisis.

The accord of 1833 lasted until 1842. President John Tyler vetoed several tariff bills so protectionists called his impeachment and tried to change the rules to provide that only a majority was required to override a presidential veto. With a nearly bankrupt treasury, Tyler finally approved the tariff of 1842, which restored many of the levels of the tariff of 1832. Every North Carolinian in Congress, regardless of party, opposed this tariff.

James K. Polk, who had been born in the Old North State and graduated from the University of North Carolina, entered the Executive Mansion with a commitment to lowering the tariff. The Walker tariff slashed duties to about twenty percent ad valorem. The vote on the Walker tariff divided North Carolina Congressmen along partisan lines. The four Whigs opposed the measure while the six Democrats supported it. Advocates of high tariffs claimed that the Walker tariff would ruin the country, but its low duties on iron actually allowed for the railroad boom of the 1850s. Congress then lowered most of the duties of the Walker with the tariff of 1857.

The Panic of 1857 resurrected the tariff debate. The Republicans needed an issue other than the opposition to the extension of slavery, and Republican leaders seized on the protective tariff. Justin S. Morrill proposed a tariff bill in 1860, which passed the House but stalled in the Senate. After the first Southern states seceded, little opposition to the tariff remained in the Senate and the Morrill tariff passed with ease. North Carolina Congressmen opposed the measure at every step.

During the Civil War, no session of Congress occurred where Congress did not alter the tariff schedules. Few items remained duty free by the end of the war. The tariffs helped keep the federal government solvent and allowed it to pay for a costly war.

Congress increased the levels of protection after the war. The issue continued to polarize political parties. Republicans sponsored a high protective tariff and Democrats advocated free trade principles. These Democrats believed that there should be no barriers to trade. North Carolina Populists criticized the “money power” of corporations, trusts, railroads, banks, and protective tariffs. In 1887, President Grover Cleveland addressed their concerns when he devoted his entire message to Congress to reforming the tariff. The presidential election of 1888 became a referendum on the tariff and the Republican candidate, Benjamin Harrison, won more electoral votes than Cleveland but lost the popular vote to the incumbent. Cleveland won North Carolina by over thirteen thousand votes.

In 1890, Republicans passed the McKinley tariff of 1890 on a strict party line vote. At the time, this tariff became the highest in the nation’s history. American voters took their wrath out on Republicans who lost the presidency and both houses of Congress in 1892 over the tariff. Democrats then tried to lower duties but the Wilson-Gorman tariff of 1894 made few reductions to the McKinley tariff.

The Dingley Tariff of 1897 restored levels close to those of the McKinley tariff. At the start of the twentieth century, Republicans second-guessed the usefulness of high tariffs. Reformers in the GOP argued that high tariffs aided trusts. In one of his first actions as president, William H. Taft called a special session of Congress to lower the tariff. This action pleased farmers and reformers in the Old North State. Congress responded with the Payne-Aldrich Tariff of 1909. This bill lowered duties on about thirty-percent of enumerated goods but raised duties on about ten-percent of goods.   About sixty percent of the goods, then, were unaffected.

The Underwood-Simmons Tariff of 1913 marked the most significant lowering of tariff duties since 1857. Average duties stood at around twenty-five percent. To offset the loss of revenue from tariff duties, Congress passed and the people ratified the sixteenth amendment, which granted Congress the power to collect an income tax. After World War I, Congress raised tariff rates once again through the Fordney-McCumber tariff of 1922.

To cope with the Great Depression, Republicans in Congress passed the Smoot-Hawley Tariff of 1930. This became the highest tariff in the nation’s history and also one of the biggest blunders in American history since it inaugurated a series of trade wars in the middle of a severe economic crisis. The New Deal proposals of Cordell Hull that eventually won the support of Franklin D. Roosevelt chipped away at high tariffs. The policy of reciprocity allowed the president to raise or lower tariff levels with other nations depending on the restrictions those nations imposed on American exports. In 1934, Congress gave the president this power with the Trade Agreements Act.

The destruction of authoritarian regimes and the rise of American influence abroad negated the need for protective tariffs. The United States participated in the General Agreement on Tariffs and Trade (GATT) until the World Trade Organization replaced it in 1995. Congress ratified the North American Free Trade Agreement (NAFTA) in November 1993, and this removed most obstacles to trade between the United States, Canada, and Mexico.  In 2005, Congress approved the US-Central American Free Trade Agreement (CAFTA). This agreement removed most trade restrictions between the United States and over thirty nations in Central America.

Foes of these free trade alignments contend that they threaten national sovereignties. The process of globalization (some contend) enriches members of multinational corporations and hurts common people. In contemporary America, free trade has become the norm as neither of the two principal political parties in America support protectionism.


Sources:

Alfred Eckes, Opening America’s Market: U.S. Foreign Trade Policy Since 1776 (Chapel Hill, 1995); Richard E. Ellis, The Union at Risk: Jacksonian Democracy, States’ Rights, and the Nullification Crisis (New York, 1987); Eric Foner, Free Soil Free Labor, Free Men: The Ideology of the Republican Party Before the Civil War (New York, 1970); William W. Freehling, Prelude to Civil War: The Nullification Controversy in South Carolina, 1816-1836 (New York, 1965); Richard Hofstadter, “The Tariff Issue on the Eve of the Civil War,” American Historical Review, XLIV (October, 1938); James L. Huston, The Panic of 1857 and the Coming of the Civil War (Baton Rouge, 1987); H. Paul Jeffers, An Honest President: The Life and Presidencies of Grover Cleveland (New York, 2000); William E. Leuchtenburg, Franklin D. Roosevelt and the New Deal, 1932-1940 (New York, 1963); Jackson T. Main, The Antifederalists: Critics of the Constitution, 1781-1788 (Chapel Hill, 1961); H. Wayne Morgan, William McKinley and His America (Kent, 2003); Phillip Shaw Paludan, A People’s Contest: The Union and Civil War, 1861-1865 (Lawrence, 1988); Jonathan J. Pincus, Pressure Groups and Politics in Antebellum Tariffs (New York, 1977); Joanne Reitano, The Tariff Question in the Gilded Age: The Great Debate of 1888 (University Park, PA, 1994); Robert V. Remini, Henry Clay: Statesman for the Union (New York, 1991), Martin Van Buren and the Making of the Democratic Party (New York, 1951); Robert Seager II, And Tyler Too: A Biography of John and Julia Gardiner Tyler (New York, 1963); Edward Stanwood, American Tariff Controversies in the Nineteenth Century.  Vol. 1 of 2. (Boston, 1903); Robert F. Wesser, “Election of 1888,” Arthur M. Schlesinger (ed.), History of American Presidential Elections.  Vol. 4 of 4. (New York, 1971); Paul Wolman, Most Favored Nation: The Republican Revisionists and US Tariff Policy, 1897-1912 (Chapel Hill, 1992); William Frank Zornow, “North Carolina State Tariff Policies, 1775-1789,” North Carolina Historical Review, XXXII (April, 1955).

By William K. Bolt, University of Tennessee


See Also:

Related Categories: Political History, Business and Industry, Revolution Era
Related Encyclopedia Entries: Constitution of 1835, William Blount (1749-1800), James K. Polk (1795-1849), Curtis Hooks Brogden (1816-1901), David Lowry Swain (1801-1868), Union County (1842), Jackson County (1851), Willie P. Mangum (1792 - 1861), Andrew Jackson
Related Commentary: Graham Brothers, The War of 1812

Timeline: 1776-1835 , 1836-1865 , 1866-1915 , 1916-1945 , 1946-1990 , 1990-present
Region: Statewide

James Turner opposed the tariff of 1816, the nation's first protective tariff. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.

James Turner opposed the tariff of 1816, the nation's first protective tariff. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.


Senator James Iredell Jr., opposed the "tariff of abominations" in 1828. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.

Senator James Iredell Jr., opposed the "tariff of abominations" in 1828. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.


Nathaniel Macon opposed the 1828 tariff, known by many southerners as the "tariff of abominations." Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.

Nathaniel Macon opposed the 1828 tariff, known by many southerners as the "tariff of abominations." Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.


Senator Willie P. Mangum disagreed with the way President Andrew Jackson handled the nullification crisis in the 1830s. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.

Senator Willie P. Mangum disagreed with the way President Andrew Jackson handled the nullification crisis in the 1830s. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.


President James K. Polk, a native Tar Heel, entered the White House with a commitment to lower the tariff of 1842. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.

President James K. Polk, a native Tar Heel, entered the White House with a commitment to lower the tariff of 1842. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.


Senator Zebulon B. Vance, along with every Congressmen from North Carolina, opposed the Morrill tariff of 1860. Image courtesy of the North Carolina Collection, University of North Carolina at Chapel Hill Libraries.

Senator Zebulon B. Vance, along with every Congressmen from North Carolina, opposed the Morrill tariff of 1860. Image courtesy of the North Carolina Collection, University of North Carolina at Chapel Hill Libraries.



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