Tariff Policy - Development and discrimination

At home, tariffs paid for the servicing of the public debt and the costs of defense and stimulated prosperity for farmers, merchants, and shipowners. Customs receipts multiplied five times during the 1790s. Imports for domestic consumption more than doubled, while the home market, protected by duties, experienced sizable gains from domestic exports. Some of the funds helped build a merchant marine independent from British shipping that boosted trade. Tariff policy of the late eighteenth century thus fueled economic prosperity, which, in turn, stimulated new settlements by a burgeoning population. Jefferson went to war to protect the rights of neutral shipping but also to retaliate against the embargo policies of Britain against U.S. merchants. The failed attempt convinced American diplomats that insulation from foreign conflict required building a domestic base of manufacturing through high-tariff protectionism. Tariff policy, in short, had evolved into an essential tool in American development and national security.

After the War of 1812 and the end of the Napoleonic wars, the protectionist approach to tariff policy dominated U.S. diplomacy; American leaders, on a nonpartisan basis, were convinced that without international peace and general commercial reciprocity, free trade was impossible. Thus, the Tariff of 1816 increased duties in order to pay for the wartime debt but also to promote the nascent production of textiles and iron. Protectionism of infant industries became standard practice. This was the thinking behind Henry Clay's American System. The United States would become Americanized, and less subject to the policy of the British Crown, by a tariff that developed the U.S. economy while it deemphasized diplomatic cooperation. This did not mean that overseas expansion into old and new markets would halt, but it did institutionalize a policy of higher tariffs.

The remarkable expansion of the United States before the Civil War was an outgrowth of this internally oriented approach, but it also necessitated an insistence on commercial reciprocity, or a mutual lowering of national tariff barriers. That is, America would lower its tariff on certain imports in return for a reduced rate abroad. The stimulation given to the U.S. economy by exports to industrializing Britain of cotton, grain, and other raw materials, and the simultaneous massive inflow of British manufactures, maintained the policy of seeking trade liberalization abroad in return for lower American duties. Although the United States was determined to be politically isolationist in regard to international affairs, its leaders also pressed onward with the mission to break down empires, liberalize the global system, and civilize underdeveloped areas of the world. Between 1820 and 1860, moreover, dependence on British trade (and investment) made American trade liberalization an imperative. Tariff policy served this multifaceted mission.

U.S. merchants wished to end the cycle of American-European retaliation that had emerged from 1789 to 1815. Mutual discrimination had led to a system of countervailing duties by each side. The Americans suffered most because their cargoes were bulky, while European ships entered U.S. ports and reexported to their colonies with compact cargoes of finished goods. Faced with additional maritime restrictions by the 1820s, and a European policy of easing mercantilist regulations in intercolonial commerce through reciprocal accords, American officials wielded tariff policy once again in self-defense. The United States had no colonies and thus could not make similar deals. Left only with a policy of insisting on completely unrestricted free trade, the Americans linked a diplomatic stance of anticolonialism to a reciprocal tariff policy.

They failed in their objectives. While Europeans gradually abolished countervailing duties in return for the termination of U.S. discriminatory tariffs, American merchants still faced commercial monopolies in the European colonies. In the British West Indies, for instance, the United States's tariff reciprocity policy capitulated to the British principle of imperial preference. The other European powers, including Russia, extended such discriminatory tariff networks into their colonies. Meanwhile, American imperialists who sought similar preferential arrangements in U.S. dominated territories in the Pacific and Latin America were rebuffed by anticolonial and latent trade liberalization sentiment at home. America sought open doors abroad but tariff policy, once again, accomplished little in this regard.

Commercial liberalization, always a hallmark of American diplomacy, drove U.S. tariff policy before the Civil War, but not for the entire country. Therein lay the linkage of tariff policy to sectionalism and the Civil War. At home, manufacturers struggled with British competition, while on the seas and in foreign ports merchants experienced French and British mercantilism and colonial restrictions. Western farmers found themselves excluded by tariffs in Europe; southern planters faced higher taxes abroad on their cotton. They blamed foreign producers and their governments for the 1819 panic and subsequent depression. Britain closed off the West Indies to U.S. vessels, and France imposed protective tariffs. American merchants demanded that the government negotiate reciprocity treaties to open foreign markets, or seek retaliation. Secretary of State and then President John Quincy Adams took up this cause, but he faced determined resistance both inside the country and out.