page_title: Tariff in United States history
section_title: Historical trends
hierarchical_section_title: Tariff in United States history / Historical trends
caption_attribution_description: English: Average Levels of Duties (1875 and 1913).
context_page_description: Tariffs have historically served a key role in the nation's foreign trade policy.Their purpose was to generate revenue for the federal government and to allow for import substitution industrialization by acting as a protective barrier around infant industries. They also aimed to reduce the trade deficit and the pressure of foreign competition. Tariffs were one of the pillars of the American System that allowed the rapid development and industrialization of the United States. The United States pursued a protectionist policy from the beginning of the 19th century until the middle of the 20th century. Between 1861 and 1933, they had one of the highest average tariff rates on manufactured imports in the world. However American agricultural and industrial were cheaper than rival products and the tariff had an impact primarily on wool products. After 1942 the U.S. promoted worldwide free trade.
  According to Dartmouth economist Douglas Irwin, tariffs have serve three primary purposes: "to raise revenue for the government, to restrict imports and protect domestic producers from foreign competition, and to reach reciprocity agreements that reduce trade barriers."
context_section_description: After the United States achieved independence in 1783, under the Articles of Confederation, the U.S. federal government, could not collect taxes directly but had to "request" money from each state—an almost fatal flaw for a federal government. Lack of ability to tax directly was one of several major flaws in the Articles of Confederation. The ability to tax directly was addressed in the drafting of the United States Constitution in May to September 1787 Constitutional Convention (United States) in Philadelphia. It came into effect in 1789. It specified that the United States House of Representatives has to originate all tax and tariff laws. The new government needed a way to collect taxes from all the states that were easy to enforce and had only a nominal cost to the average citizen. They had just finished a war on "Taxation without Representation". The Tariff of 1789 was the second bill signed by President George Washington imposing a tariff of about 5% on nearly all imports, with a few exceptions. In 1790 the United States Revenue Cutter Service was established to primarily enforce and collect the import tariffs. This service later became the United States Coast Guard.
  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".
  Alexander Hamilton and Daniel Raymond were among the first theorists to present the infant industry argument. Hamilton was the first to use the term "infant industries" and to introduce it to the forefront of economic thinking. 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. Thus, the American Revolution was, to some extent, a war against this policy, in which the commercial elite of the colonies rebelled against being forced to play a lesser role in the emerging Atlantic economy. T
caption: Average Levels of Duties (1875 and 1913)
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