… is from page 102 of Gordon Wood’s excellent 2009 volume, Empire of Liberty: A History of the Early Republic, 1789-1815 (footnote deleted):
Since his entire fiscal program depended on the customs duties flowing from a large overseas commerce, [Secretary of the Treasury Alexander] Hamilton was reluctant to weaken that overseas commerce for the sake of developing domestic commerce.
DBx: Hamilton, although naive about the source of economic growth, understandably preferred subsidies to protective tariffs as a means of helping ‘infant industries.’ Tariffs that discourage enough imports to ‘stimulate’ domestic industry are unlikely to raise enough revenue to fund the expenses of a government that relies heavily on customs duties for revenue.
Do not, therefore, believe Oren Cass and the many other protectionists who insist – as Cass did in this October 2023 piece – that “in 1789, the first law in the first Congress – advocated by Alexander Hamilton, introduced by James Madison and signed by George Washington on the Fourth of July – established a tariff not unlike Trump’s.”
The tariff of 1789 was nothing like Trump’s. Trump’s tariffs were meant to protect domestic producers; in contrast, that first U.S. tariff was meant to raise revenue rather than to protect domestic producers. As Doug Irwin reports on page 131 of in his monumental 2017 history of U.S. trade policy, Clashing Over Commerce, “the Tariff of 1816 was the first ‘protectionist’ tariff of the United States in the sense that it was mainly designed to provide assistance to domestic manufacturers facing foreign competition.” By 1816, both George Washington and Alexander Hamilton were long dead.
It bears repeating: The tariff of 1789 was a revenue tariff and not a protective tariff. The fact that protectionists continue to confuse the two kinds of tariffs, and even to write – as Cass does – as if the revenue-raising function and protective function of tariffs are aligned, rather than in conflict, with each other, speaks only to the unseriousness of the thought that protectionists bring to the debate over trade policy.
