“Tariffs are the greatest!” President Trump crowed on Twitter on Tuesday morning. If that represents a break from contemporary Republican orthodoxy, it’s a message other GOP presidents once embraced. Trump has previously quoted William McKinley declaring that tariffs made Americans lives “sweeter and brighter and brighter and brighter.” (For the record, McKinley only said “brighter” once.) And after Congress passed the Tariff Act of 1909, William Taft declared it “the best bill that the Republican party ever passed.”
But the voters disagreed, vehemently. In the next two elections, they obliterated the GOP’s congressional majority, crushed Taft’s reelection hopes, and sent the party into a tailspin. Tariff policy was one of the most divisive issues in American politics, because its costs and benefits were unevenly distributed. Protectionist policies offered windfalls to large corporations while burdening small businesses and farmers with higher prices. That stirred bitter resentments in less industrialized, agricultural regions, fueling North-South discord before the Civil War, and inflaming Midwestern populism in the early 20th century, splitting political parties in the process. If Trump continues his protectionist course, it could happen again.
The trouble with tariffs started soon after the nation's founding. When Congress convened for the first time in the spring of 1789, James Madison implored his colleagues to resolve "the deficiency in our Treasury" by establishing import duties. In addition to raising revenue, the original tariffs were also designed to "protect our infant manufactures" from more mature and efficient industries in Europe.
The congressmen agreed on the need for tariffs, but they differed on how the duties should be apportioned. Every state had local industries to protect. Virginia sought a tariff to protect hemp farmers in its western territory. But New Yorkers feared higher hemp prices would bankrupt their rope makers, so they insisted that the rope tariff be increased in proportion to the hemp tariff. Massachusetts objected to tariffs on rope or hemp, complaining that higher rope prices would harm its shipbuilders. South Carolina, which had little industry, objected to all the protective tariffs on manufactured goods and called for a straight 5 percent revenue tariff across the board.
As the quarrels and deliberations extended into summer, the government sank deeper into debt. At last, on July 4, 1789, Congress passed “an Act for laying a Duty on Goods, Wares, and Merchandises imported into the United States.” It included duties on 76 items, beginning with rum and ending with horse carriages, each taxed according to its importance to the congressmen and senators who had assembled at Federal Hall that summer. Everything else was taxed at 5 percent.
Despite this compromise, tariff policy continued to divide the country. Congress kept the duties on raw materials low while steadily increasing duties on finished goods, which helped Northern manufacturers control costs while raising prices. By contrast, Southern farmers had to pay more for farm equipment and other manufactured products, yet received little protection for their crops. The simmering tensions erupted after Congress passed a heavily protectionist tariff bill in 1828. South Carolina's government denounced the "Tariff of Abominations" and claimed the right to nullify the law, provoking a constitutional crisis. Once again, Congress eventually found a compromise, but resentment over the issue continued to stoke North-South tensions leading into the Civil War.
By the late 1800s, American manufacturers no longer needed protection from Europe, but powerful industrialists manipulated the political system to drive tariffs ever higher. The Tariff Act of 1897 filled 70 pages and enumerated 705 categories of merchandise from aluminum and peppermint to feather dusters and “toothpicks of wood or other vegetable substance.” Many duties were exquisitely designed to benefit specific corporations, known as trusts, whose lobbyists drafted parts of the bill. Small businesses, unable to compete with the politically-connected trusts, folded or sold out. Southern and Midwestern farmers, squeezed by falling produce prices and rising costs for shipping and equipment, struggled to keep their land.
As the inequity surged, political unrest rippled through the nation's interior. Populist third parties rose like Furies from the savannas of Georgia to the plains of Montana. At the Democratic National Convention of 1896, rank-and-file delegates stunned the party establishment by nominating William Jennings Bryan, a fiery Nebraskan orator who called high tariffs "the means of extortion" by which trusts established monopolies.
The moment of reckoning was still to come, however. Bryan's politics were too radical for most voters, and the Democrats were too fractured. Republicans began the 20th century with pro-tariff stalwart William McKinley in the White House and a huge majority in Congress. But cracks began to appear within the GOP as well. Midwestern insurgents protested unfair tariffs and accused the Republican establishment of corruption. When Theodore Roosevelt became president after McKinley's assassination, he stunned Republican elites by attacking the trusts. He privately wished to reduce tariffs as well but refrained for fear of splitting the party.
After Roosevelt came the flood. William Taft, his bumbling successor, promised “a genuine and honest revision of the tariff” but signed a bill that was as corrupt and inequitable as any that had come before. When he pronounced it “the best bill that the Republican party ever passed,” outrage erupted across rural America, and the Republican Party cracked. In 1910, Democrats captured the House for the first time in decades. In 1912, Roosevelt abandoned the GOP and founded a new progressive party committed to tariff reform and anti-trust regulation. Democrats took the White House and Senate that year, and Taft lost his reelection bid with 23 percent of the vote. In Oklahoma, he received fewer votes than the Socialist candidate.
In the 1920s, Republicans returned to power and resumed their protectionist agenda, but when crop prices fell, Midwesterners again turned on the party. Chastened by Taft's experience, President Herbert Hoover promised to aid farmers by raising agricultural tariffs. The Smoot-Hawley Tariff Act of 1930 did protect crops, but it also radically increased the duties on manufactured goods, provoking a trade war with Europe at the worst possible time. As the Great Depression spread misery across the country, voters blamed Hoover's tariff. In 1932, they elected FDR in a landslide and pummeled the GOP.
Reduced to a perennial minority, Republicans finally abandoned their protectionist doctrine and embraced free trade. The ferocious tariff debate that had dominated American politics since the nation's founding slipped into the shadows, remembered only by historians and economists.
Until Donald Trump. Quoting McKinley's paean to protectionism, Trump has enacted tariffs on hundreds of products from China, Europe, Canada, and Mexico at a scale not seen since 1930. These tariffs are only a few weeks old, yet we're already seeing the same inequities that characterized previous tariffs. Corn and wheat prices fell after China retaliated; soybeans are down 20 percent since April. Meanwhile, Trump's steel tariff is raising production costs for John Deere and Caterpillar, which will inflate the cost of farm equipment.
While agricultural communities are getting hit with higher prices, corporate lobbyists have gone into high gear. Thousands of companies have applied for waivers from the new tariffs. And just as the shipbuilders and rope-makers once demanded protection to offset hemp tariffs, some manufacturers are seeking additional protection to offset steel tariffs. “We’re going to need the administration to impose tariffs on downstream steel products,” said Paul Czachor, CEO of American Keg Co. in Pottstown, Pennsylvania, “We need tariffs on imported kegs.”
The Trump administration has also reached back to a New Deal-era program to offer American farmers $12 billion to offset their losses. Farmers groups were quick to criticize the step as inadequate, pointing to estimates of losses that already exceed that sum.
If and when the economy falters, these costs will only intensify. Small businesses will fail. Farms will founder. Then the rural voters who turned out so heavily for Trump will begin to see what their forebears once knew: Tariffs are rigged against them. The fury of such voters splintered the Republicans a century ago and condemned the party to decades of political exile. Today's GOP depends to a much greater extent on rural voters, so when "Trump country" turns against tariffs, the fall will be even harder.
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