The Hamilton Tariff of 1789 was the second statute ever enacted by the new United States government. Most of the rates of the tariff were between five and ten percent, depending on the value of the item. As Secretary of the Treasury, Alexander Hamilton was anxious to establish the tariff as a regular source of revenue for the government and as a protection of domestic manufacture. The former was of immediate necessity; the latter was not. Instead, it established the principle of protectionism that was to become a persistent political dispute throughout the next century and a half.
The Tariff of 1792 was the third of Alexander Hamilton's protective tariffs in the United States (first was the Hamilton tariff of 1789, second was the Tariff of 1790). Hamilton had persuaded the United States Congress to raise duties slightly in 1790, and he persuaded them to raise rates again in 1792, although still not to his satisfaction. Protectionism was one of the fulfillments of Hamilton's Report on Manufactures.
The level of tariffs had been increasing in the United States since the passage of a general administrative tariff act. The First Barbary War led to a slight rise of the tariff called the Mediterranean Fund with the tariff applicable to staple imports ranging from ten to fifteen percent. These tariffs were doubled in order to pay for the War of 1812. These tariffs were believed to have led to the strengthening of American industry not only in New England but also in New York and Pennsylvania.
The Tariff of 1816 was put in place after the War of 1812. Britain had developed a large stockpile of iron and textile goods. Because this stockpile was so large, the price of British goods soon plummeted in comparison to that of American goods. Consequently, many Americans bought British goods rather than American goods, hurting American manufacturers. James Madison and Henry Clay devised a plan to help American producers, called the American System. It included a protective tariff more commonly known as the Tariff of 1816, which increased the price of British goods so that American goods could compete with them. The northern United States were quite pleased by this tariff. Since the North's economy was based on manufacturing, many of its industries and workers competed with British imports and benefited from the tariff. The Southerners, however, were outraged, since they were net consumers of the manufactured goods which now cost more; further their agricultural exports to Britain might be threatened if Britain retaliated.
Secretary of the Treasury Alexander J. Dallas recommended the retention of the tariff regime in place during the 1812 War in a report published in February 1816 in order to develop American industry in the event of another war with the United Kingdom or other European powers. It was introduced following a report from U.S. Treasury Secretary Alexander J. Dallas and adopted by the Fourteenth Congress. The proposal was adopted by President James Madison and congressional leadership, notably Speaker Henry Clay. A House of Representatives Committee recommended the adoption of this tariff predicting that it would only be necessary for a few years until the United States was strong enough to defend itself against foreign powers. The tariff was popular in areas such as Pennsylvania and New York where manufacturing industry was growing rapidly. It was supported widely in those states to defend American manufacturers against competition from British manufacturers. It was also popular in the West in states such as Kentucky, HEnry Clay's home state, where it was hoped to develop hemp and flax as crops and who wanted new tariffs to support these infant industries.
The proposal was less popular with New England merchants who were hoping to restore trade with England and other European powers and import products from Europe in return for U.S. exports such as cotton. Daniel Webster represented their viewpoint and he managed to win some concessions about the level of the tariff. It was also less popular in the South as it would increase the costs of production of their export crops, notably cotton. It was also opposed by people who saw it as raising the costs of living of the poor. John Randolph in his speech in opposition raised both of these points. "Upon whom bears the duty on coarse woollens and linens and blankets, upon salt and all the necessaries of life? Upon poor men and upon slaveholders." However, the tariff was supported by notable Southern leaders such as President James Madison and former president Thomas Jefferson. Notably, John C. Calhoun, of South Carolina, who would be a strong opponent of future tariff regimes supported the Dallas tariff in the Congress. The Act was passed in April of 1816 with rates of twenty-five per cent against woollen and cotton goods and a highest rate of thirty per cent. Further, no duty on cotton and woollen goods was to be less than six and a quarter cents a yard which would have a regressive impact over time. The measure had support from elected representatives from every state except Delaware and North Carolina.
The tariff was retained until 1824 when it was massively increased. In 1828, the so-called Tariff of Abominations was introduced increasing the rate of tariffs significantly to assist Northern manufacturers. This was massively unpopular as it raised the costs of production significantly. Further, as the measure increased the price of cotton goods, British textile manufacturers sold less in the U.S. and reduced their purchases from Southern cotton growers accordingly. This tariff was massively unpopular in the South and opposition was led by Vice-President John C. Calhoun who broke with President John Quincy Adams over the issue. Calhoun then became Vice-President under Andrew Jackson who introduced the Tariff of 1832 that reduced the level of tariffs somewhat but not enough for Calhoun. He resigned in order to become a Senator for South Carolina thus prompting the Nullification Crisis where South Carolina declared the 1828 and 1832 tariffs null and void, then started raising a military force in support of their action. This crisis was averted through the Compromise of 1833 negotiated by Henry Clay where tariff rates were progressively returned to the level of the Dallas Tariff by 1842. This averted further threats of nullification although the debate was a precursor to the arguments over slavery in the future. The Dallas Tariff then remained in force until after the Civil War with some further reductions.
The Tariff of 1833 (also known as the Compromise Tariff of 1833) was proposed by Henry Clay and John C. Calhoun as a resolution to the Nullification Crisis. It was adopted to gradually reduce the rates after Southerners objected to the protectionism found in the Tariff of 1832 and the 1828 Tariff of Abominations, which had prompted South Carolina to threaten secession from the Union. This Act stipulated that import taxes would gradually be cut over the next decade until, by 1842, they matched the levels set in the Tariff of 1816--an average of 20%. The compromise reductions lasted only two months into their final stage before protectionism was reinstated by the Black Tariff of 1842.
The Tariff of 1842, or Black Tariff as it became known, was a protectionist tariff schedule adopted in the United States to reverse the effects of the Compromise Tariff of 1833. The Compromise Tariff contained a provision that successively lowered the tariff rates from their level under the Tariff of 1832 over a period of ten years until the majority of dutiable goods were to be taxed at 20%. As the 20% level approached in 1842, industrial interests and members of the Whig Party began clamoring for protection, claiming that the reductions left them vulnerable to European competition. The bill restored protection and raised average tariff rates to almost 40%.
The bill stipulated sweeping changes to the tariff schedule and collection system, most of which were designed to augment its protective character. The law replaced most ad valorem rates with specific duties assessed on a good-by-good basis. It also repealed the credit system of tariff finance and replaced it with a cash payment system, collected at portside customs houses.
The impact of the 1842 tariff was felt almost immediately through a sharp decline in international trade in 1843. Imports into the United States nearly halved from their 1842 levels and exports, which are affected by overall trade patterns, dropped by approximately 20%.
The Tariff of 1842 was repealed in 1846 when it was replaced by the Walker Tariff. The Whigs' loss of Congress and the presidency in 1844 facilitated a Democratic-led effort to reduce the rates again. Concerns that the Black Tariff's high rates would suppress future trade and customs revenue with it fueled the movement to repeal the act.
The 1846 Walker Tariff was a Democratic bill that reversed the high rates of tariffs imposed by the Whig-backed Black Tariff of 1842 under President John Tyler. It was one of the lowest tariffs in American history and primarily supported by Southern Democrats who had little industry in their districts.
The act is named after Robert J. Walker, a Mississippi politician who served as Secretary of the Treasury under President James K. Polk. The tariff's reductions (35% to 25%) coincided with Britain's repeal of the Corn Laws earlier that year, leading to a decline in protection in both and an increase in trade.
The bill resulted in a moderate reduction in many tariff rates and was considered a success in that it stimulated trade and brought needed revenue into the U.S. Treasury, as well as improved relations with Britain that had soured over the Oregon boundary dispute. As Walker predicted, the new tariff stimulated revenue intake from $30 million annually under the Black Tariff in 1845 to almost $45 million annually by 1850. Exports to and imports from Britain rose rapidly in 1847 as both countries lowered their tariff barriers against each other.
It was passed along with a series of financial reforms proposed by Walker including the Warehousing Act of 1846. The 1846 tariff rates initiated a fourteen-year period of relative free trade by nineteenth century standards lasting until the high Morrill Tariff signed by President James Buchanan in March of 1861 (see below).
The Walker Tariff remained in effect until the Tariff of 1857, which used it as a base and reduced rates further.
The Tariff of 1857 was a major tax reduction in the United States, creating a mid-century lowpoint for tariffs. It amended the Walker Tariff of 1846 by lowering rates to around 17% on average.
The Tariff of 1857 was authored primarily by Robert Mercer Taliaferro Hunter of Virginia. The bill was offered in response to a federal budget surplus in the mid-1850s. Hunter intended to disperse this surplus through a tax cut.
Supporters of the bill came mostly from Southern and agricultural states, which tended to be export dependent and tended to support the free trade position. They were also joined by a handful of New England wool manufacturers. This constituency traditionally supported protectionism in the nineteenth century. A series of political setbacks for the protectionist movement in the early 1850s, however, prompted them to forgo protection for their own goods in exchange for reduced tariffs on their raw material imports such as Canadian wool. According to Kenneth Stampp, the bill:
Was possible because it did not represent a victory of one section over the other; nor did it produce a clear division between parties. Its supporters included Democrats, Republicans, and Americans; representatives of northern merchants, manufacturers, and railroad interests; and spokesmen for southern farmers and planters. Opposition came largely from two economic groups: the iron manufacturers of Pennsylvania and the wool growers of New England and the West.
Producers from other traditional protectionist constituencies such as iron, glass, and sheep farmers opposed the bill. When the Panic of 1857 struck later that year, protectionists, led by economist Henry C. Carey, blamed the downturn on the new Tariff schedule. Though economists today reject this explanation, Carey's arguments rejuvenated the protectionist movement and prompted renewed calls for a tariff increase.
The Tariff of 1857's cuts lasted only three years. In 1861, the country changed course again under the heavily protectionist Morrill Tariff.
The Morrill Tariff of 1861 was a protective tariff bill passed by the U.S. Congress in early 1861. The Act is informally named after its sponsor, Representative Justin Smith Morrill of Vermont, who designed the bill around recommendations by Pennsylvania economist Henry C. Carey. It was signed into law by Democratic President James Buchanan of Pennsylvania, where support for higher tariffs to protect the iron industry was strong. It replaced the Tariff of 1857. Some historians such as Beard and Beard (1928) argued there was a divergence in economic interests between an industrializing Northeast and a plantation South before the American Civil War. But Beard did not identify the tariff as a major issue that divided North and South. Two additional tariffs sponsored by Representative Morrill, each one higher, were passed during President Abraham Lincoln's administration to raise urgently needed revenue for the war.
The high rates of the Morrill Tariff inaugurated a period of relatively continuous trade protection in the United States that lasted until the Revenue Act of 1913 (aka the Underwood Tariff). The schedule of the Morrill Tariff and its two successor bills were retained long after the end of the Civil War.
The immediate effect of the Morrill Tariff was to more than double the tax collected on most dutiable items entering the United States. In 1860, American tariff rates were among the lowest in the world and also at historical lows by nineteenth century standards, the average rate for 1857 through 1860 being around 17% overall (ad valorem), or 21% on dutiable items only. The Morrill Tariff immediately raised these averages to about 26% overall or 36% on dutiable items, and further increases by 1865 left the comparable rates at 38% and 48%. Although higher than in the immediate antebellum period, these rates were significantly lower than between 1825 and 1830, when rates had sometimes been over 50%.
The United States needed more revenue to support its troops in the field - $320 million for the next year, of which three-fourths had to come from tariff revenues. Therefore Secretary of the Treasury Salmon P. Chase, a long-time free-trader, worked with Morrill to pass a second tariff bill in the summer of 1861, raising rates another ten points in order to generate more revenues. These subsequent bills were primarily revenue driven to meet the war's needs, though Luthin notes they enjoyed the support of protectionists such as Carey, who again assisted Morrill in the bill's design. It played a modest role in the financing of the war, funding about 11% of the war effort (in terms of its tariff revenues). It was less important than other measures, such as bond sales. Customs revenue was $345 million from 1861 through 1865, or 43% of all federal tax revenue, while spending on the War and Navy departments totalled $3.065 million.
There is some evidence the new American tariff angered many British commentators and politicians; a few went to the extreme of voicing support for the new Confederate States of America over the United States of America. The expectation of high rates probably caused British shippers to hurry up their deliveries before the new rates took effect, so that there was a decline in British exports to the United States in the early summer of 1861. When complaints were heard from London, Congress counter-attacked. The Senate Finance Committee chairman snapped, "What right has a foreign country to make any question about what we choose to do?" Answering allegations by the British and free trade supporters that the poor would be hurt by the new tariff, Congress defiantly raised the tariff a third time to ensure funding for the war effort. It added a temporary (expiring at the end of the war) income tax of 3% on incomes over $800; paid primarily by the wealthy, for most workers made under $500 a year. This was the first Income Tax in American history. Further Congress passed a 3% tax on domestic manufacturers for war purposes.
The Morrill Tariff was compared to the 1828 Tariff of Abominations by its opponents, although its overall rate was significantly lower. On November 19, 1860, Senator Robert Toombs denounced the "infamous Morrill bill" as the product of a coalition of "the robber and the incendiary...united in joint raid against the South" in his speech advocating secession to the Georgia Legislature. However, Toombs said preservation of slavery was the cause of secession. Of the four Secession Declarations, only Georgia's mentions the tariff issue. The December 25, 1860 address of South Carolina to Slaveholding States complains about excessive taxation and heavy import duties - a reference to the then-pending Morrill Bill:
"And so with the Southern States, towards the Northern States, in the vital matter of taxation. They are in a minority in Congress. Their representation in Congress is useless to protect them against unjust taxation; and they are taxed by the people of the North for their benefit, exactly as the people of Great Britain taxed our ancestors in the British parliament for their benefit. For the last forty years, the taxes laid by the Congress of the United States have been laid with a view of subserving the interests of the North. The people of the South have been taxed by duties on imports, not for revenue, but for an object inconsistent with revenue to promote, by prohibitions, Northern interests in the productions of their mines and manufactures."
On the other hand, cotton state representatives hoping to lure Virginia into their new confederation promised a protective tariff that would enable Virginia to become an industrial state, replacing New England as the source of manufactured items. According to Luthin, "Historians are not unanimous as to the relative importance which Southern fear and hatred of a high tariff had in causing the secession of the slave states." Charles Beard argued in the 1920s that very long-term economic issues were critical, with the pro-tariff industrial Northeast forming a coalition with the anti-tariff agrarian Midwest against the plantation South. Beard's model fell out of favor in the 1950s, and few historians any longer agree with it, as shown by Richard Hofstadter (Progressive Historians). Historians also emphasize that with a major war looming that the USA urgently needed much higher federal revenue, and as Taussig has shown, the tariff was the easiest way to get it. However, there has been a resurgence of interest in Beard's theory among free-traders (who want to eliminate tariffs), economists, and pro-Confederate historians. A 2002 study by economists Robert McGuire and T. Norman Van Cott concluded:
"A de facto constitutional mandate that tariffs lie on the lower end of the Laffer relationship means that the Confederacy went beyond simply observing that a given tax revenue is obtainable with a "high" and "low" tax rate, a la Alexander Hamilton and others. Indeed, the constitutional action suggests that the tariff issue may in fact have been even more important in the North-South tensions that led to the Civil War than many economists and historians currently believe."
The new Confederacy also needed revenue and it passed its own tariff of about 15%. Much more important, it imposed its tariff on all imports from the USA. If there had been peace this would be an enormously disruptive event, forcing all local trade across new international boundary to funnel through custom houses and be taxed. Of course the Lincoln government refused to recognize the Confederacy as independent and did not impose a tariff on goods moving from south to north. Nor did the Confederacy ever collect significant tariff revenues - it collected a mere $3 million from 1861-65. The U.S. had imposed a blockade on foreign trade with the south and a war embargo on north-south trade in provisions deemed to be helpful to the Confederate war efforts.
Historians including Allan Nevins and James M. McPherson downplay the significance of the tariff dispute, arguing that it was secondary to the issue of slavery. They point out that slavery dominated the secessionist declarations from the four states that published them - only Georgia's mentions tariffs at length. Nevins also points to the argument of Alexander Stephens, who initially opposed Georgia's secession and who, in a speech to the Georgia Secession Convention, disputed the severity of the threat that the Morrill Bill posed; although by the time of his Cornerstone Speech (March 1861), he makes a strong point of how Georgia in particular was "compelled to pay into the common treasury several millions of dollars for the privilege of importing the iron, after the price was paid for it abroad," thus making its ambitious rail building even more expensive. However, the "cornerstone" he refers to was slavery and he made it clear that was the "immediate cause" of the war.