Imprimis Podcast Summary

Episode: Tariffs in American History
Host/Author: Hillsdale College
Guest Speaker: John Steele Gordon
Release Date: June 13, 2025
Duration: Approximately 19 minutes

Introduction

In this episode of Imprimis, Lauren, a senior economics student at Hillsdale College, introduces the May 2025 issue titled "Tariffs in American History" by John Steele Gordon, author of An Empire: The Epic History of American Economic Power. The discussion is adapted from Gordon's lecture delivered in Washington, D.C., as part of the AWC Family Foundation Lecture Series.

Early History of Tariffs in America

Tariffs as Early Taxes

Tariffs are among the oldest forms of taxation in America, primarily because they are straightforward to collect. Gordon explains, “Just send in the tax collectors and don't let the goods being transported move until the duty has been paid” (00:25). This simplicity made tariffs a preferred method for generating revenue in the colonial period.

Colonial Smuggling and Resistance

During America's colonial period, smuggling was rampant as colonists evaded British tariffs on a grand scale. Rhode Island, with its extensive coastline and numerous harbors, became the epicenter of this activity. Gordon notes, “Rhode Island was the first colony to forswear allegiance to Great Britain on May 4, 1776, two months before the Declaration of Independence” (02:10). The state’s resistance to federal taxation continued post-independence, making it the last to ratify the Constitution in 1790 under the threat of foreign taxation on its exports (04:00).

The Role of Alexander Hamilton

Establishing the Financial Foundation

Upon the Constitution's enactment in 1789, the fledgling United States faced a dire financial situation. Alexander Hamilton, the first Secretary of the Treasury, spearheaded the creation of a tariff schedule and introduced excise taxes on alcohol and tobacco. He emphasized, “The Constitution forbids taxing the exports of any state, and so American tariffs have always been laid only on imports” (05:30). Hamilton's financial policies, including the establishment of a central bank, significantly improved the nation's credit rating in Europe and tripled federal revenues by 1800, with tariffs constituting 90% of this income (07:45).

The Rise of American Industry and Sectionalism

Industrial Growth in the North

Hamilton's tariffs initially aimed solely at revenue but soon became tools to protect burgeoning American industries from foreign competition. Gordon highlights the industrial espionage that fueled America's Industrial Revolution, citing Samuel Slater's successful establishment of a spinning mill in Rhode Island (09:15). By the 1820s, manufacturing in the Northern states had grown exponentially, employing 2 million people—ten times the number a mere five years earlier (12:00).

Sectional Disputes over Tariffs

This industrial boom in the North contrasted sharply with the agrarian South, which relied heavily on cotton production. Northern states favored high tariffs to protect their industries, while Southern states advocated for low tariffs to reduce the cost of imported goods. This tension reached a boiling point with the Tariff of 1828, dubbed the "Tariff of Abominations" by Southern politicians. Gordon recounts, “Southern congressmen inserted high tariffs of 45% on these commodities into the bill, hoping to split off enough New England congressmen to defeat it. Their attempt failed” (15:20).

The Tariff of Abominations and Nullification Crisis

Political Fallout and Nullification

The passage of the 1828 tariff, despite Southern opposition, led to significant political repercussions. President John Quincy Adams faced defeat in his re-election bid, paving the way for Andrew Jackson's presidency. However, Vice President John C. Calhoun of South Carolina objected vehemently to the tariff, advocating for states' rights to nullify federal laws deemed unconstitutional. Gordon explains, “Calhoun anonymously wrote a pamphlet asserting the right of states to nullify federal laws that they regarded as unconstitutional” (17:30).

Jackson's Response and Compromise

Jackson, committed to preserving the Union, strongly opposed nullification. He declared, “I consider the power to annul a law of the United States assumed by one state, incompatible with the existence of the Union” (18:10). The crisis was eventually resolved with the Compromise Tariff of 1833, which gradually reduced tariff rates over a decade, leading South Carolina to repeal its ordinance of nullification.

Civil War and Tariffs

Wartime Economic Policies

The Civil War marked a significant escalation in government spending, necessitating higher tariffs and the introduction of new taxes, including the first income tax and stamp tax. Gordon states, “The combination of wartime demand and high tariffs produced an enormous boom in American industry, as new domestic production replaced foreign imports” (20:05).

Post-Civil War Tariffs and Economic Growth

Economic Expansion and Tariff Revenue

Post-war America saw sustained industrial growth supported by high tariffs, allowing the federal government to run surpluses and reduce national debt significantly. However, tariffs remained a contentious issue, disproportionately affecting the poor by acting as a consumption tax. Efforts to introduce an income tax to offset tariffs were thwarted by the Supreme Court’s 1895 ruling deeming such measures unconstitutional (24:00).

The Smoot-Hawley Tariff and the Great Depression

Policy Missteps Leading to Economic Downturn

In 1928, amidst economic challenges, President Herbert Hoover supported the Smoot-Hawley Tariff, which raised tariffs on 20,000 imported goods to unprecedented levels. Gordon criticizes this policy, quoting Thomas Lamont: “I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley Smoot tariff” (28:35). The tariff sparked retaliatory measures globally, leading to a dramatic decline in world trade—from $36 billion in 1929 to $12 billion by 1932—and exacerbated the Great Depression (30:00).

Post-WWII Trade Policies and GATT/WTO

Rebuilding and Liberalizing Trade

In the aftermath of World War II, the United States recognized the importance of rebuilding global trade to foster economic stability and prevent future conflicts. This led to the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947, which aimed to reduce tariffs and eliminate trade barriers. Gordon highlights the success of GATT, noting that global trade expanded from $12 billion in 1932 to $23 trillion by 2023 (35:20). GATT evolved into the World Trade Organization (WTO) in 1995, further promoting international trade liberalization.

Modern Trade Issues

Persistent Trade Barriers and New Challenges

Despite the progress made through GATT and WTO, certain trade barriers remain. For instance, differential tariffs from the post-war era still exist, such as the U.S. imposing a 2.5% tariff on German cars, while Germany charges a 10% tariff on American cars. Additionally, China's accession to the WTO did not lead to the expected adherence to fair trade practices, with ongoing issues like intellectual property theft and unfair trade policies (40:10).

Current Trade Policies and Future Outlook

President Trump’s administration has initiated a trade war aimed at leveling the playing field, reflecting ongoing tensions in international trade dynamics. Gordon concludes by emphasizing the transformative impact of reduced tariffs on global trade and poverty reduction, while acknowledging the complexities and challenges that persist in modern trade relations (45:00).

Conclusion

John Steele Gordon's lecture provides a comprehensive overview of the pivotal role tariffs have played in shaping American economic history. From their inception as simple revenue tools to their impact on industrial growth and international relations, tariffs have been both a catalyst for prosperity and a source of conflict. The evolution of trade policies, influenced by historical lessons, continues to define the economic landscape today.

Notable Quotes:

• “Tariffs are among the oldest of taxes for the simple reason that they are easy to collect.” — John Steele Gordon (00:25)

• “Rhode Island was the first colony to forswear allegiance to Great Britain on May 4, 1776, two months before the Declaration of Independence.” — John Steele Gordon (02:10)

• “Calhoun anonymously wrote a pamphlet asserting the right of states to nullify federal laws that they regarded as unconstitutional.” — John Steele Gordon (17:30)

• “I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley Smoot tariff.” — Thomas Lamont (28:35)

Note: This summary excludes advertisements, introductions, and other non-content sections to focus solely on the substantive discussions presented in the podcast episode.