page_title: Tariff
section_title: United States
hierarchical_section_title: Tariff / History / United States
caption_attribution_description: English: U.S. Average Tariff Rates (1821-2016)
context_page_description: A tariff is a tax on imports or exports between sovereign states. It is a form of regulation of foreign trade and a policy that taxes foreign products to encourage or safeguard domestic industry. Traditionally, states have used them as a source of income. Now, they are among the most widely used instruments of protectionism, along with import and export quotas.
  Tariffs can be fixed or variable. Taxing imports means people are less likely to buy them as they become more expensive. The intention is that they buy local products instead – boosting the country's economy. Tariffs therefore provide an incentive to develop production and replace imports with domestic products. Tariffs are meant to reduce pressure from foreign competition and reduce the trade deficit. They have historically been justified as a means to protect infant industries and to allow import substitution industrialization. Tariffs may also be used to rectify artificially low prices for certain imported goods, due to 'dumping', export subsidies or currency manipulation.
context_section_description: Before the new Constitution took effect in 1788, the Congress could not levy taxes—it sold land or begged money from the states.  The new national government needed revenue and decided to depend upon a tax on imports with the Tariff of 1789. The policy of the U.S. before 1860 was low tariffs "for revenue only" (since duties continued to fund the national government).  A high tariff was attempted in 1828 but the South denounced it as a "Tariff of Abominations" and it almost caused a rebellion in South Carolina until it was lowered.  
  Between 1816 and the end of the Second World War, the United States had one of the highest average tariff rates on manufactured imports in the world. According to Paul Bairoch, the United States was "the homeland and bastion of modern protectionism"during this period  
  Many American intellectuals and politicians during the country's catching-up period felt that the free trade theory advocated by British classical economists was not suited to their country. They argued that the country should develop manufacturing industries and use government protection and subsidies for this purpose, as Britain had done before them. Many of the great American economists of the time, until the last quarter of the 19th century, were strong advocates of industrial protection: Daniel Raymond who influenced Friedrich List, Mathew Carey and his son Henry, who was one of Lincoln's economic advisers. The intellectual leader of this movement was Alexander Hamilton, the first Secretary of the Treasury of the United States (1789-1795). Thus, it was against David Ricardo's theory of comparative advantage that the United States protected its industry. They pursued a protectionist policy from the beginning of the 19th century until the middle of the 20th century, after the Second World War.
  In Report on Manufactures which is considered the first text to express modern protectionist theory, Alexander Hamilton argued that if a country wished to develop a new activity on its soil, it would have to temporarily protect it. According to him, this protection against foreign producers could take the form of import duties or, in rare cases, prohibition of imports. He called for customs barriers to allow American industrial development and to help protect infant industries, including bounties (subsidies) derived in part from those tariffs. He also believed that duties on raw materials should be generally low. Hamilton argued that despite an initial "increase of price" caused by regulations that control foreign competition, once a "domestic manufacture has attained to perfection… it invariably becomes cheaper. He believed that political independence was predicated upon economic independence. Increasing the domestic supply of manufactured goods, particularly war materials, was seen as an issue of national security. And he feared that Britain's policy towards the colonies would condemn the United States to be only producers of agricultural products and raw materials.  
  Britain initially did not want to industrialize the American colonies, and implemented policies to that effect (for example, banning high value-added manufacturing activities). Under British rule, America was denied the use of tariffs to protect its new industries. This explains why, after independence, the Tariff Act of 1789 was the second bill of the Republic signed by President Washington allowing Congress to impose a fixed tariff of 5% on all imports, with a few exceptions
  The Congress passed a tariff act (1789), imposing a 5% flat rate tariff on all imports. Between 1792 and the war with Britain in 1812, the average tariff level remained around 12.5%. In 1812 all tariffs were doubled to an average of 25% in order to cope with the increase in public expenditure due to the war. A significant shift in policy occurred in 1816, when a new law was introduced to keep the tariff level close to the wartime level—especially protected were cotton, woolen, and iron goods. The American industrial interests that had blossomed because of the tariff lobbied to keep it, and had it 
caption: Average tariff rates in US (1821–2016)
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