A Historical Perspective on U.S. Tariffs: From Early Revenue to Modern Trade Wars
For weeks, U.S. President Donald Trump has continued to talk about tariffs, attempting to impose and suspend them in exchange for concessions from affected countries. This behavior is perplexing yet not entirely new, as tariff usage has evolved significantly over centuries in the United States. From a primary source of revenue to contentious trade tools, tariffs have been a significant part of U.S. history.
The Tariff Act, one of the first laws approved by Congress after American independence in 1789, established tariffs as a norm and primary revenue source for the government until the Civil War. However, advocates for a free market, especially among Southern states, began to shift sentiments regarding tariffs. With the introduction of an income tax in 1913, the reliance on tariffs for federal revenue diminished.
The landscape changed dramatically with the Great Depression. In 1930, President Herbert Hoover passed the Smoot-Hawley Act, reintroducing significant tariffs to protect American farmers. This move backfired, provoking foreign nations to retaliate, leading to drastic declines in international trade and exacerbating the economic crisis. Hoover's presidency suffered as a result, failing to win re-election, leading to his successor Franklin D. Roosevelt's implementation of free trade agreements.
In the post-World War II era, U.S. policy generally leaned toward reducing tariffs, with exceptions arising in response to foreign trade actions. One notable episode was the "Chicken War". In 1963, the European Economic Community enforced steep tariffs on U.S. chicken exports to protect their domestic poultry, prompting President Lyndon Johnson to retaliate by imposing tariffs on various imported goods, some of which remain today.
Interestingly, the tariff system leads to quirky legal cases. For example, in the early 2000s, Marvel successfully argued that their X-Men action figures should be classified as nonhuman toys for tax purposes, reducing tariff burdens significantly.
Another significant event occurred in 1993 with a banana tariff dispute stemming from European Union protectionism benefiting former colonies. The U.S., aligning with corporate interests in South America, imposed retaliatory tariffs on Scottish cashmere and certain European cheeses.
In contrast, the Reagan administration introduced a 14 percent tariff on Canadian lumber in 1982, arguing that U.S. companies faced competition under public subsidies. Despite this move, Canadian lumber remains a major source for U.S. construction. Similarly, Reagan imposed punitive tariffs on Japanese goods to correct trade imbalances, which ultimately did little to create lasting economic changes.
Among the more unusual examples of tariffs was a 1990 127 percent fee on Chinese-made staples—an effort that significantly increased domestic production of these goods. More recently, under Trump's administration, steel and aluminum tariffs were reinstated, which raised prices domestically and spurred initial production boosts but also led to retaliatory tariffs from countries like Canada.
This complex history reveals how tariffs have been wielded by U.S. presidents across time—not merely as tax measures but as instruments of economic and diplomatic strategy. As we reflect on this legacy, it becomes clear that understanding the past actions surrounding tariffs may shed light on current trade dynamics and their implications for the future.
Related Sources: