A tariff, or schedule of custom duties on goods, generally serves one of three purposes: raising government revenue, protecting domestic production, or attempting to persuade foreign countries to change specific policies. Tariff policy in the early Republic was a particularly divisive issue, highlighting the nation's diversity of philosophies and interests and, in some cases, sparking constitutional debates.
the first tariff
Under the Articles of Confederation, states set tariff levels, often leading to conflicting policies and leaving the general government dependent on the states for revenue. To end this, the drafters of the Constitution of 1787 required uniform duties and in Article I, section 8 gave Congress the sole power to "lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States." To ensure open access to overseas markets, they also expressly forbade Congress from passing export duties. This seemingly simple framework, however, left considerable room for disagreement over the means and ends of tariff legislation.
On 8 April 1789, only days after the first Congress reached quorum, James Madison introduced the first piece of tariff legislation, a revenue proposal designed to ensure that the Treasury benefited from spring imports. Almost immediately, several members of Congress questioned whether duties should not also protect American manufacturers. Representatives from Pennsylvania, a state with a history of protective state duties, sought higher levels. Southern states, committed to exporting staple crops, desired little or no protection for manufacturers. After serious debate, a compromise measure passed both houses. It set ad valorem rates of from 7.5 to 10 percent on specific luxury and manufactured goods and 5 percent duties on the rest.
hamilton's report on manufactures
The following year Congress asked Secretary of the Treasury Alexander Hamilton to assess the best way to promote national manufacturing. His famous Report on Manufactures was submitted to Congress on 5 December 1791. This document laid the groundwork for an activist government by supporting high tariffs and promoting a diversified economy. The Report suggested the usefulness of government aid for manufacturing through duties, patents, and especially direct subsidies or bounties. Yet Hamilton's commitment to an active international commerce and the revenue it brought (which helped fund the national debt) led him to advocate only modest tariff increases. He proposed raising rates on some twenty products by from 5 to 10 percent, eliminating or reducing tariffs on others deemed necessary for manufacturing, and temporarily increasing the base ad valorem rate from 5 to 7.5 percent. Subsequent opposition to Hamilton's plan, much of which Congress passed over southern objections in early 1792, targeted not specific rates but the Report's broad construction of the "general welfare" clause in offering bounties to specific industries. While Hamilton favored the encouragement of manufacturing, his policies do not suggest he favored high tariffs to protect them. As with most of his contemporaries, Hamilton envisioned a national economy founded primarily on commercial agricultural production for Atlantic markets. By 1797 the base tariff had been incrementally raised to 12.5 percent as part of the efforts to further reduce the national debt.
war, peace, and panic
Military and commercial warfare during the Jefferson and Madison administrations slowly began to change some groups' perspectives on the appropriate economy for the country. Restricted trade led many Republicans to praise a more diversified national economy and the realities of war drove tariffs to new heights. In 1804, support of a small navy to protect ships against Barbary pirates raised the ad valorem schedule another 2.5 percent. Jefferson's embargo and the War of 1812 against Britain created conditions favorable for industrial growth, leading many Republican artisans and manufacturers to support protection. When war with Britain began, tariff rates were doubled in July 1812.
The return of peace in 1815 raised concern that British goods would destroy nascent American industries. Over the objection of most (but not all) southern Republicans and many Federalists, National Republicans in Congress retained protected levels to support iron and textile producers. These efforts proved only marginally successful, and when the Panic of 1819 threatened to ruin manufacturers, Philadelphia publicist Mathew Carey (1760–1839) and U.S. representative Henry Baldwin (1780–1844) from Pittsburgh called for further increases of between 5 and 10 percent. Though successful in the House, the measure failed in the Senate by one vote, as its supporters were unable to overcome the South's almost unanimous opposition (1 to 15 against).
By 1824, however, despite continued resistance in New England and the South, heavy majorities from the mid-Atlantic region and the West narrowly passed a tariff raising average rates from 27.4 to 34.5 percent. The legislation's success rested on support for an expanding home market for American goods and a belief that self-sufficiency, rather than a favorable balance of trade, determined national wealth. Besides manufacturers, western grain producers—seeking federally funded internal improvements and restricted in lucrative markets by the British Corn Laws—also supported higher tariffs, a major plank of Henry Clay's emerging American System. Southern tobacco, rice, and cotton producers, however, sent over two-thirds of their crops to foreign markets. Joining some northern merchants in opposition, they contended that the measure forced them to pay more as consumers and restricted trade with European nations, which might look elsewhere for their supplies. According to these free traders, protectionists sought a monopoly of southern trade and a redistribution of southern wealth to the North.
the tariff of abominations
Efforts on behalf of and against the tariff reemerged in 1827, when protectionists sought to raise the tariff on woolen textiles to nearly 50 percent. The bill passed the House by 106 to 95 but failed in the Senate when Vice President John C. Calhoun (1782–1850) of South Carolina cast the tie-breaking vote against. Both angered and emboldened, manufacturers organized a large convention at Harrisburg, Pennsylvania, to gather their strength. Fearing the inevitability of a higher tariff and the increased consolidation of wealth and power that might result, South Carolinians Thomas Cooper (1759–1839) and Robert Turn-bull (1775–1833) argued it was time for the South to "calculate the value of union" and suggested radical constitutional remedies such as state nullification of the tariff or even secession. Other former nationalists, including George McDuffie (1788–1851) and Calhoun, hoped that the tariff could be rolled back by political means.
When tariff legislation was offered in 1828, southern Congressmen sought to make the bill objectionable to key New England senators by helping to pass extremely high tariffs on raw materials for manufacturing. This strategy of out-protecting the protectionists backfired, however, when former free trade allies such as Massachusetts senator Daniel Webster (1782–1852) "swallowed the bitter pill," accepting the higher tariff on raw materials in exchange for protective levels for their manufactured goods. The resulting tariff was as high as 50 percent on many goods. According to most southerners, this "tariff of abominations" confirmed the region's minority status and violated at least the "spirit of the Constitution." Subsequent efforts at legislative compromise in 1832 defused the issue for many but failed to appease the most avid southern free traders. Some called for a constitutional convention, others for nullification, a strategy that a number of South Carolinians believed might be a useful tool in an anticipated struggle to protect slavery. Only after a convention of South Carolinians nullified the tariff and President Andrew Jackson threatened to force compliance with tariff laws did legislators reach a compromise that resolved the impasse by incrementally reducing the tariff to revenue-only levels.
Until the 1980s, modernization theory and developmental economics led historians to see free trade opposition to protective tariffs as a reaction against modernity. A more positive understanding of free trade, however, has led many economists to suggest that, at least until the 1850s, antebellum tariffs, in addition to harming southern interests, were probably too high to optimize national economic production. Regardless of its effects, the debates over the tariff left lasting scars in both the North and the South and continued to remain an important issue up to and through the Civil War.
Irwin, Douglas. "New Estimates of the Average Tariff of the United States, 1790–1820." Journal of Economic History 63, no. 2 (June 2003): 506–513.
James, John A. "The Optimal Tariff in the Antebellum United States." American Economic Review 71, no. 4 (September 1981): 726–734.
Peskin, Lawrence A. Manufacturing Revolution: The Intellectual Origins of Early American Industry. Baltimore: Johns Hopkins University Press, 2003.
Stanwood, Edward. American Tariff Controversies in the Nineteenth Century. 2 vols. New York: Houghton, Mifflin, 1903. Reprint, 2 vols., New York: Russell and Russell, 1967.