How America Became a Superpower

Tariffs: America’s Original Growth Strategy

We all heard the hyperbole and doomsday predictions surrounding President Trump’s use of tariffs to rebalance global trade, influence foreign adversaries, and refill America’s coffers. It will crash the economy! It will increase inflation! People will die! 

I may be exaggerating the last claim, but the prevailing narrative across mainstream media—and among many Democrats and Republicans alike—was that tariffs would cause lasting economic harm. However, strategy and the wise use of tariffs made America a superpower. 

The History of Tariffs in the United States

The first Congress passed the Tariff Act in 1789 to raise revenue and support domestic manufacturing. It was so effective that it quickly became the primary source of income for the federal government. What many don’t know is that tariffs covered most federal spending (80-95% through much of the 19th century) until the federal income tax was authorized in 1913. As a constitutionalist, I find this a frustrating development. Our first president, General George Washington, was once asked what he thought about a federal income tax. He expressed the view that he didn’t believe he had a right to put his hand in another man’s pocket. 

In 1791, Treasury Secretary Alexander Hamilton wrote in his Report on Manufacturers that our young country needed protections for manufacturers to compete with Europe’s well-established producers. I.e., use tariffs to discourage purchases of European goods to establish young US manufacturers in the marketplace. It worked. By the 19th century, America had become the leader in manufacturing, financed the government, and protected new industries as they grew. The trade-off was higher prices for American consumers, but one accepted in a young country that needed to establish itself as a serious one. 

The Morrill Tariff in 1861 increased tariffs to finance the Civil War and protect industry. Post-war tariffs maintained their importance and increased on manufactured goods. This was the Gilded Age policy when tariffs often exceeded 30-40%. Because of the tariffs, the US industrial base expanded quickly—especially in steel, rail equipment, machinery, and chemicals, and, once again, protected new industries from competitive European firms, allowing the US to become the leading industrial power. 

The Shift from Tariffs to Federal Income Tax

The 16th Amendment established the federal income tax. The 1913 Underwood Tariff reduced tariff rates, moving the bulk of US revenue from customs to personal income tax. World War I disrupted international trade, so the effects of transitioning to a tax-based income system were not immediately felt. In addition, rates were increased in 1922 to protect post-war industries and agriculture. It wasn’t until the disastrous Smoot-Hawley Tariff Act that tariffs damaged the economy more than they helped. 

The Smoot–Hawley Tariff Act, sponsored by Republicans Reed Smoot and Willis Hawley, was passed in 1930 and dramatically raised tariffs on more than 20,000 imported goods. Its stated goal was to protect American farmers and manufacturers from foreign competition during a period of economic stress, which was a tried-and-true strategy, but their failure to carefully examine the US’s economic reality led to a terrible outcome. 

After the Smoot–Hawley Tariff was enacted, its effects quickly cascaded across the global economy. Major U.S. trading partners responded with retaliatory tariffs on American goods, sharply reducing access to foreign markets for U.S. farmers and manufacturers. As retaliation spread, global trade collapsed—falling by roughly 60 percent between 1929 and 1934—causing U.S. exports to plummet and wiping out income for industries the tariff was meant to protect. While the Smoot–Hawley Tariff did not cause the Great Depression, it didn’t help and made the use and timing of tariffs crucial—tariffs must be used from a position of economic strength.

After the Smoot-Hawley Tariff, Congress passed the 1934 Reciprocal Trade Agreements Act that allowed the president to negotiate tariffs but gave Congress oversight. By the late 20th century, industrial tariffs fell from double digits to single digits, global trade grew faster than global GDP, and America became more dependent on tax revenue. The 1994 NAFTA free trade agreement all but removed tariffs, except in sensitive sectors like agriculture and steel, reducing prices for American consumers; however, is paying a little more for products rather than paying payroll taxes and federal income tax a bad thing? Unfortunately, income and payroll taxes fund many entitlements, making them nearly impossible to discontinue due to public sentiment. A Constitutional amendment requires two-thirds of the states to agree. Pigs will fly before that happens.

After NAFTA, US-based companies went to other countries, such as Mexico and China, to manufacture products and created “just-in-time” logistics, meaning lower inventory for retailers. Instead, they get products just-in-time, which made us dependent on adversarial countries like China, which could hold hostage essential items like prescription drugs, electronic chips, and more. It also created massive trade deficits. 

A trade deficit occurs when a country imports more goods and services than it exports—put simply, when it buys more from other nations than it sells to them. The difference is financed through money flows, investment, or debt. While access to lower-cost goods and strong consumer demand benefit American households, persistent trade deficits can also signal weakened domestic production and dangerous reliance on foreign suppliers. When those suppliers are adversarial nations, trade deficits are no longer just an economic statistic but a strategic vulnerability.

Why Tariffs Are a Good Idea in Today’s Economy and Foreign Policy

1. Kinetic wars persist, but the defining conflicts of our era are economic. Reliance on adversarial countries for manufacturing and industrial products weakens us as a nation because essential goods can be withheld at the other country’s discretion, in line with its dominance goals. Imagine what would happen to us during another pandemic if we can’t get life-saving medication shipped from China, where most of our medication is manufactured? We don’t need our imagination; they did just that during COVID. 

2. Tariffs are bargaining chips in both trade negotiations and easing tensions between hostile countries. President Trump has done this and eased trade imbalances with numerous countries, including Mexico, China, Europe, Canada, Japan, and South Korea. 

3. Tariffs increase government revenue.

4. Tariffs can still protect new, fledgling industries until they are established.

When Tariffs Are a Bad Idea

The Smoot-Hawley Tariff Act taught us some hard-won lessons:

1. Raising tariffs during an economic downturn can be a bad idea. The risk of severe retaliation from other countries (as we saw at the beginning of Trump’s tariff policies) requires a strong economy. 

2. Weak leadership makes tariffs risky. Historically, successful tariff negotiations have required leaders willing to absorb short-term political and economic pressure in pursuit of longer-term strategic gains. Negotiating with world leaders and refusing to budge until the other side blinks is not for the faint of heart, given the blowback that can come from foreign governments, domestic legislators, and public opinion. Sustaining that level of discomfort and resolve is increasingly uncommon in modern politics. 

3. Availability of substitute goods is crucial in tariff policy. You don’t want consumers not to be able to buy the things they need. 

4. The lack of a clear policy and tariff duration is a recipe for failure. Tariffs are tools that require a well-thought-out strategy to be effective and to recruit consumers to accept the temporary discomfort of higher prices. 

Summary of Tariff Benefits

1. Reliable revenue to fund the federal government, maintain social stability, and invest in public goods that improve productivity and creativity.

2. Nurture infant industries to encourage investment, scaling, and job and skill creation.

3. Enable industry clusters—Pennsylvanian steel, New England textiles, Midwest machinery. 

4. Reduces vulnerability to foreign supply disruptions by bringing industry back to the US.

5. Rapid retooling of factories for military production during wartime. 

America now possesses many of the conditions necessary for tariffs to succeed—economic scale, market leverage, and strategic necessity. When applied deliberately and with clear objectives, tariffs can once again play a constructive role in strengthening domestic industry and advancing national power.