Tariffs have played a central role in shaping U.S. economic and political policy since the country’s founding. They’ve been used to generate revenue, protect domestic industries, retaliate against foreign competitors, and steer the country’s trade relationships. From early protectionist policies to modern debates over globalization, tariffs reflect shifting economic philosophies and political pressures.
Tariffs in the Early Republic
When the United States gained independence, the federal government lacked a reliable source of income. The Constitution granted Congress the power to levy tariffs, and this authority became the backbone of government revenue for much of the 18th and early 19th centuries. The Tariff Act of 1789 was the first major legislation to impose duties on imported goods, with two purposes: to raise money and protect emerging American industries.
Tariffs quickly became a central issue in national politics. Northern states favored higher tariffs to support local manufacturers, while Southern states, which relied on imported goods and exported raw materials, generally preferred lower rates. These divisions would grow deeper over time.
The Protective Tariff Era
As industrialization took hold in the early 19th century, Congress passed a series of increasingly protective tariffs. The Tariff of 1816 was one of the first to include explicit protections for American manufacturing. It was followed by the Tariff of 1824 and the Tariff of 1828, the latter earning the nickname “Tariff of Abominations” from Southern critics who believed it harmed their economy.
Tariffs contributed to sectional tensions between North and South. South Carolina’s opposition to the 1828 tariff led to the Nullification Crisis of 1832, when the state declared the tariffs unconstitutional and threatened to secede. The federal government, under President Andrew Jackson, responded with a show of force and a compromise tariff that helped diffuse the situation.
Civil War and Postwar Industrial Growth
Tariff policy continued to divide the country during the 1850s. When the Civil War began, the Southern states seceded, leaving a pro-tariff Republican majority in Congress. This shift allowed for the passage of higher protective tariffs, starting with the Morrill Tariff of 1861. These tariffs supported Northern industries during the war and remained in place afterward to fuel the growth of American manufacturing.
After the war, high tariffs became a permanent feature of Republican economic policy. They were seen as a way to promote industrial expansion and keep foreign competition at bay. This approach aligned with the interests of powerful business interests and labor groups in industrial regions.
The Gilded Age and Tariff Politics
By the late 19th century, tariffs were one of the most debated topics in American politics. The McKinley Tariff of 1890 raised duties to unprecedented levels, triggering widespread consumer backlash. Two years later, Democrats passed the Wilson-Gorman Tariff Act, which lowered rates but was largely ineffective due to amendments added by protectionist senators.
During this period, the tariff issue became closely tied to broader debates over income distribution and the role of government in managing the economy. The revenue function of tariffs began to decline as other sources of federal income, especially the income tax, emerged.
Tariff Reform and the Income Tax
The ratification of the 16th Amendment in 1913 gave Congress the authority to levy a federal income tax. This allowed for a shift away from tariffs as the primary source of revenue. That same year, the Underwood Tariff Act significantly reduced duties on imports, signaling a move toward more open trade.
However, the protectionist mindset didn’t disappear. The Tariff Commission was established in 1916 to provide independent analysis on tariff issues, a step toward more data-driven policy decisions.
The Great Depression and the Smoot-Hawley Tariff
The 1930s marked a major turning point in U.S. tariff policy. In response to the global economic downturn, Congress passed the Smoot-Hawley Tariff Act, which raised duties on over 20,000 imported goods. The measure was intended to shield American jobs but instead contributed to a collapse in international trade and deepened the global depression.
Retaliation from other countries followed, and U.S. exports dropped sharply. The economic fallout from the act led to a reassessment of trade policy and a growing recognition that high tariffs could have unintended consequences.
The Shift Toward Trade Liberalization
In the years after World War II, the United States embraced a new approach to trade. Policymakers began to support lower tariffs and greater economic cooperation as a way to promote global stability. The Reciprocal Trade Agreements Act of 1934 had already started this shift by allowing the president to negotiate bilateral tariff reductions.
Later, the U.S. became a founding member of the General Agreement on Tariffs and Trade (GATT) in 1947. This agreement established a framework for reducing trade barriers through multilateral negotiations. Over time, GATT evolved into the World Trade Organization, which continues to manage global trade rules today.
During the postwar decades, tariff rates steadily declined. Successive rounds of negotiations—such as the Kennedy Round, the Tokyo Round, and the Uruguay Round—reduced barriers across a wide range of goods. The average tariff rate on imports dropped from over 20 percent in the early 1930s to less than 5 percent by the 1990s.
Free Trade Agreements and New Trade Policies
In the 1990s and early 2000s, the United States entered a number of free trade agreements (FTAs), such as the North American Free Trade Agreement (NAFTA), the Central America Free Trade Agreement (CAFTA), and bilateral deals with countries like South Korea and Australia. These agreements removed or reduced tariffs and were intended to open foreign markets to U.S. businesses.
Supporters said FTAs gave American consumers more choices at lower prices and helped U.S. companies expand globally. Others pointed to negative impacts on workers in industries exposed to foreign competition and raised questions about economic fairness.
By the late 2000s, tariff debates were less about rates and more about enforcement, intellectual property, and the balance of trade. This set the stage for a more confrontational approach to trade in the following decade.
Tariffs Under Donald Trump’s First Term
The first term of President Donald Trump marked a dramatic return to protectionist tariff policies. His administration prioritized reshaping trade relationships through the use of tariffs as a negotiating tool. The approach centered on reducing the U.S. trade deficit, bringing manufacturing jobs back to the United States, and pressuring foreign governments to make concessions in trade deals.
One of the most significant moves came in 2018, when the administration imposed tariffs on steel and aluminum imports under Section 232 of the Trade Expansion Act, citing national security concerns. This decision affected not only strategic rivals but also long-standing allies, leading to retaliatory measures from the European Union, Canada, and Mexico.
Another major escalation involved China. The Trump administration imposed a series of tariffs on hundreds of billions of dollars’ worth of Chinese goods, citing unfair trade practices, intellectual property theft, and concerns over market access. China responded with tariffs on U.S. exports, including agricultural products, triggering a protracted trade conflict. Both countries eventually reached a limited agreement known as the “Phase One” deal in early 2020, which included commitments by China to increase purchases of U.S. goods.
Tariffs were also used as leverage in trade negotiations with other countries. The renegotiation of NAFTA resulted in the United States–Mexico–Canada Agreement (USMCA), which included new provisions on labor, digital trade, and rules of origin for automobiles. The administration also threatened tariffs against Mexico over immigration policy and considered new duties on imports from Europe and Japan.
These policies were controversial. Supporters argued that they brought long-neglected issues to the forefront and compelled trading partners to address long-standing concerns. Critics said the tariffs disrupted supply chains, raised costs for American businesses and consumers, and sparked uncertainty in global markets.
Tariffs Under Donald Trump’s Second Term
During Donald Trump’s second term in office, which began in January 2025, trade policy continued along the same trajectory. While some earlier tariffs remained in place, others were modified or adjusted as trade negotiations progressed. The second term featured a renewed focus on what the administration described as economic self-reliance, particularly in the wake of the global disruptions caused by the COVID-19 pandemic.
The second term’s approach reflects and aggressive and a broader industrial strategy that included tariffs as part of a wider effort to control supply chains, bolster domestic employment, and shape the future of high-tech industries.
Tariffs in the 21st Century
Outside of specific administrations, tariff policy in the 21st century has continued to evolve in response to economic trends, political shifts, and global events. Tariffs now serve purposes beyond simple protection, including leverage in diplomacy, support for national industries, and alignment with security interests.
At the same time, there is continued debate over their effectiveness. Some industries benefit from the insulation tariffs provide, while others face higher input costs and retaliatory trade actions. The broader economic impact often depends on the scale of the measures and the responses they trigger from trade partners.
Summary
Tariffs have shifted from a foundational revenue source to a strategic policy instrument used to influence trade, support domestic industry, and respond to geopolitical challenges. Over time, the debate over tariffs has mirrored broader shifts in economic philosophy, party politics, and international relations. From early American independence to modern global trade tensions, tariffs have remained a powerful and adaptable tool in the government’s economic playbook.
