Our History of Protectionist Tariff Train Wrecks

by
Thomas J. DiLorenzo
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Protectionist tariffs are associated with a long history of economic and social calamities in America. An important reason for this is that protectionist tariffs are a political tool of plunder and theft, and people don’t generally take kindly to being plundered and robbed. 

The only real difference between a lobbyist for protectionist tariffs and an armed robber is that the robber is armed. If the robber says “Give me a thousand dollars or I will shoot you” it is obviously an act of armed robbery. The thousand dollars goes out of your pocket and into the robber’s pocket. If lobbyists for the automobile industry succeed in convincing Congress to pass a tariff increase on cars that results in the average car being $1,000 more expensive, then that thousand dollars goes out of the pockets of car buyers and into the pockets of the (unarmed) care sellers. As John C. Calhoun once sarcastically said, what protectionist tariffs “protect” us from is lower prices. 

The First Tariff War

In 1824 the protectionist forces in Congress, led by Kentucky hemp grower Henry Clay who wanted high tariffs on imported hemp, succeeded in passing a tariff bill that doubled the average tariff rate. Since most of the tariff increases on dozens of products applied to manufactured products from the North, it created a North/South divide on the issue. The agricultural South would be forced to pay more for shoes, clothing, woolen blankets and coats, farm tools, and other manufactured goods just so the Northern manufacturers could make even more profits. The South viewed it as purely an instrument of plunder and theft. Of the 107 House of Representatives votes in favor of the tariff only three came from Southern states. In the U.S. Senate there were 25 yes votes with only two from Southern states. 

Emboldened by this success, Clay and his protectionist compatriots, mostly from the North, increased the tariff rate even further in 1828 to an average of around 50 percent. It was called the “Tariff of Abominations” by Southerners. South Carolina’s politicians called it “a system of robbery and plunder,” which of course it was. They adopted the Jeffersonian tool of an ordinance of nullification that declared the act to be “unauthorized by the Constitution” and was therefore “null, void, no law, nor binding upon this State . . .” All tariff collection in South Carolina was suspended on February 1, 1833. Tariff collectors were to be fined and imprisoned for collecting tariff taxes and the legislature allocated $200,000 for the purchase of firearms with which to enforce tariff nullification. There was the threat of secession (which the New England Federalists had similarly threatened fifteen years earlier) with President Andrew Jackson blustering about an invasion to enforce the tariff. They eventually compromised and reduced the average tariff rate over the next ten years in order to avoid secession with the Compromise of 1833. 

As soon as that ten-year agreement was up, the same Northern cabal of protectionists, who had the votes in Congress, raised tariff rates again, with the “Black Tariff” of 1842. That led to the first meeting in South Carolina to seriously discuss secession. The meeting took place in Bluffton, South Carolina, organized by South Carolina Congressman Robert Rhett, and was attended by some five hundred prominent South Carolinians who became known as “The Bluffton Boys.” They once again considered nullification as well as secession. The 1843 meeting had nothing to do with slavery; it was to protest the plunder of protectionist tariffs. 

At the time all Americans accepted both nullification and secession as legitimate rights of citizens as a means of influencing and controlling their federal government. No one threatened to bomb Hartford and Boston into a smoldering ruin when the New England Federalists held their secession convention in Hartford in 1814. John C. Calhoun was a unionist who opposed the “Bluffton Boys” so they neither nullified the Black Tariff nor seceded at that time. Rhett became known by some as “the father of Southern secession.”

The Second Tariff War

On the eve of the Civil War the average tariff rate had declined to 15 percent, the lowest of the nineteenth century, but the recession of 1857 was used as an excuse to pass the Morrill Tariff during the 1859-60 session of Congress (prior to Southern secession), which would more than double the average tariff rate to over 32 percent. It was passed by the Senate and signed into law by President James Buchanan (D-Pennsylvania Steel Industry) on March 2, 1861, two days before Lincoln’s inauguration.

Then when Lincoln gave his first inaugural address, knowing that the lower South had seceded and refused to pay any more tariff tributes to Washington, D.C., he used the words “invasion” and “bloodshed” to describe what would happen in any state that refused to collect and send to Washington, D.C. the newly-doubled tariff tax (which accounted for more than 90 percent of federal tax revenue at the time). He kept his word and invaded the Southern states in a war that was over tax collection fogged by his colorful rhetoric about “saving the union.” Saving tariff revenue was his real admitted purpose. 

According to the latest research as many as 850,000 Americans died in Lincoln’s tariff collection war with more than double that number maimed for life. That number alone is more than all Americans who died in all other wars. (The official War Aims Resolution of the U.S. Congress (Crittenden-Johnson Resolution), by the way, stated that the purpose of the war was NOT to disturb “the domestic institutions of states,” by which it meant slavery, but to “save the union”). Lincoln raised tariff rates ten times, leaving the average tariff rate at close to 60 percent by the end of the war, where it would stay until the federal income tax was adopted in 1913. That’s forty-eight years of protectionist plunder and theft.

Protectionist tariffs always discriminated against American farmers. High protectionist tariffs impoverish America’s trading partners who are then less able to purchase American goods, primarily farm goods. In addition to paying more for items upon which higher tariffs are placed, farmers also find that much of their foreign business has dried up. They are effectively taxed twice. 

A political deal was cut such that America’s farmers would support a federal income tax if, in return, the tariff rate was reduced, which it was. That was in 1913. Then when the stock market crash of 1929 occurred the protectionists in Congress naturally used it as an excuse to radically increase the average tariff rate. They did so with the Smoot-Hawley Tariff, signed into law by President Herbert Hoover in March of 1930 despite opposition by over 1,000 economists. The stock market tanked and farmers were left with an income tax and the highest tariff rates ever.

The Kill-the-International-Division-of-Labor Tariff

The Smoot-Hawley Tariff increased tariff rates on over 800 items with an average rate of 59.1 percent, as high as it had ever been. Twelve countries immediately retaliated by placing high tariffs on American imports into their own countries, spawning an international trade war. By March of 1933 international trade by the seventy-five most active trading countries had shrunk from $3 billion/month to less than $.5 billion/month, an 83 percent reduction. This meltdown of world trade imploded the international division of labor and greatly exacerbated the Great Depression. 

Think about all this the next time you hear President Trump wax eloquently and lovingly about protectionist tariffs and threaten 200 percent tariffs on country after country, oblivious to the societal train wrecks that protectionist tariffs have caused throughout American history.