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The Tariff Act of 1789 was designed to protect manufacturing in the U.S. and generate revenue for the government. It was the first major piece of legislation passed since the ratification of the Constitution and was signed by President George Washington. After the American Revolution, the U.S. was unable to reach trade deals with most European nations and needed to prevent a flood of foreign goods from damaging domestic manufacturers.
The Embargo Act of 1807 prohibited American ships from trading in all foreign ports. President Thomas Jefferson passed the Act in response to the British-French war, which saw American ships seized by both sides, since the U.S. was neutral in the conflict.
Ultimately the War of 1812 broke out between the U.S. and Britain due to Britain blocking off neutral trade with France. Tariffs were raised after the war to generate income for the government and continue to protect U.S. industries from the influx of cheaper British goods.
The Tariff of 1828, known by many in the South as the “Tariff of Abominations,” was created during the presidency of John Quincy Adams to protect the industry in the North. It set a 38 percent tax on 92 percent of imported goods and a 45 percent tax on raw materials, such as tobacco and cotton. This was one of the first major issues that began to divide the North and the South leading up to the Civil War.
In 1846 after James K. Polk was elected president, he signed the Walker tariff that sought to unite the North and South. The goal was a “tariff for revenue only” (remember at this point there was still no income tax) that would pay for the government, but not show favoritism to one sector over another. The Walker tariff saw average tariffs of around 25 percent, which appeased the South and still angered the North.
Rates slowly lowered from 1846 onward; however, the North was still unhappy. The Morrill Tariff was implemented shortly before President Abraham Lincoln took office, and was only passed because the Southern Senators walked out when their respective states left the Union. The Civil War had begun and rates were raised due to the cash needed for wartime.
Tariffs remained fairly high after the Civil War in order to protect Northern manufacturers. Most of the nation eventually accepted the high tariffs as a way to generate revenue, plus U.S. manufacturing and imports were starting to boom. Tariff levels averaged between 38 to 52 percent from 1865 to 1913.
The 16th amendment was ratified, which permanently legalized the income tax. Tariffs were then lowered with the Underwood Tariff since income tax was now the main source of generating revenue for the government.
The Tariff Act of 1930, also known as the Smoot-Hawley Tariff, was a protectionist policy that raised tariffs to a near historic high and resulted in reciprocal tariffs from most trading partners. Consensus view is that the tariffs actually exacerbated the effects of the 1929 stock market crash, rather than aid in recovery. Imports and exports during the Great Depression dropped by more than half. The average tariff rate on dutiable imports rose from 40.1 percent in 1929 to 59.1 percent in 1932.
The General Agreement on Tariffs and Trade (GATT) was signed by 23 nations in Geneva following World War II to promote international trade by reducing or eliminating tariffs and quotas. This remained in place until a larger agreement was signed in 1995.
The Trade Act of 1974 was passed to create fast track authority for the president to negotiate trade agreements that Congress can approve or disapprove, but cannot amend or filibuster. The Act was meant to help the U.S. become more competitive and give the president tariff negotiating authority.
Protectionist policies had largely been dropped during the Reagan and Bush administrations in favor of minimal economic barriers to global trade. In 1994 the North American Free Trade Agreement (NAFTA) was ratified to ease trade between the U.S., Mexico and Canada
The World Trade Organization (WTO) was formed in January 1995 under the Marrakesh Agreement and was signed by 123 nations, replacing GATT. It is the largest international economic organization in the world and deals with regulation of trade between participating countries. The WTO also has a dispute resolution process and prohibits discrimination between trading partners, although does provide some exceptions.
President Donald Trump announced a 25 percent tariff on steel and a 10 percent tariff on aluminum imports, after earlier in the year announcing a tariff on imported solar panels and washing machines. Nearly a year after imposition, the U.S., Canada and Mexico reached a deal to remove the tariffs in May 2019.
President Donald Trump imposed tariffs on Chinese imports due to Chinese theft of U.S. intellectual property. China then imposed tit-for-tat tariffs on American imports. Several additional rounds of tariffs have been levied and the so called “trade war” remains ongoing as of June 2019, despite multiple rounds of negotiating between the two nations.
As shown above, tariffs have a lengthy history in the U.S. They have largely been used by administrations to generate income for the government and protect domestic industries from foreign competition.
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