Did you know the first major piece of legislation ever passed by Congress, after the ratification of the Constitution, was a tariff? [1] Tariffs have been a topic of discussion in politics since the birth of our nation.
America’s current tariff situation will make a lot more sense if we contextualize it with some history. In doing so now, I hope you’ll see how tariffs make sense in certain situations, but also understand why they’re unadvisable in most others— including the situation in which the Trump administration wants them applied.
The first nationwide tariff, known as the Tariff Act of 1789, was broadly supported by politicians [2]. Its main purposes were to help our infant nation pay off its war debt and protect developing vulnerable industries. This can give domestic products advantages with their prices. By making foreign goods and services more expensive, they can give domestic producers power to set their prices more advantageously.
Trump describes his tariff agenda as protecting Americans from nations taking advantage of the United States. He points out that we import more than we export (that’s known as a trade deficit) and, since the 2000s, have gone from the world’s biggest creditor to its biggest debtor. Trump worries that these inequalities will “erode investor confidence in the economy, distress the financial markets, and endanger U.S. economic and national security.” [3] He hopes to counteract those ills using tariffs, the same tool used during George Washington’s presidency.
A few decades later, the issue of tariffs exploded. Congress passed a tariff (nicknamed the “Tariff of Abominations”) that helped the North and hurt the South. Chaos ensued. President John Quincy Adams was deeply wounded politically. America’s two-party system, which had been dormant, roared to life. Tariffs weren’t a no-brainer: in fact, they were becoming a constitutional crisis.
The South went haywire because tariffs constitute a tax on consumers and importers. South Carolina flat out refused to comply and started arming itself to resist compulsion from the federal government. Things only calmed down when the bill was renegotiated.
The Tariff of Abominations shows how tariffs can benefit certain entities, but hurt the majority. This is happening in the American economy today. Last month, CNN reported that “In real dollar terms, the tariffs amounted to an average tax increase of $1,000 per household in 2025” [4] When it gets expensive for American companies to import, they usually just raise their prices instead of turning to American manufacturing. Because of this, the biggest losers when it comes to tariffs are almost always domestic consumers.
According to the Congressional Budget Office, “U.S. businesses will absorb 30% of the import price increases by reducing their profit margins; the remaining 70% will be passed through to consumers by raising prices.” [5] Because of this, tariffs are functionally taxes.
This is the thing. Sweeping tariffs might’ve worked for us 250 years ago. But since then, the world’s economy has grown exponentially larger. It’s more efficient, sophisticated and complex. Global trade allows countries and geographic regions to specialize and excel at what they do best. In economics, this is known as comparative advantage. Specialization equals growth in productivity. If every country had to do and make everything itself, our efficiency and productivity would nosedive.
When major powers wield tariffs out of self defense, everyone suffers. Take the Smoot-Hawley Tariff Act of 1930; it hoped to solve America’s economic woes, but instead backfired. Over twenty countries retaliated, and the global trade situation that was already bad got much worse, falling 60% by 1934. The 1930 Tariff Act deepened the Great Depression instead of improving it. [6]
Tariffs worldwide have been on the decline ever since the Great Depression and World War II. This has contributed to worldwide economic growth [7]. Countries have slowly realized what economics have known for a long time: tariffs are almost always a net negative for everyone. [8] Less tariffs can ease inflation and lower costs. Free trade can promote growth, competition, and efficiency. [9]
Politicians and voters nervous about the economy often see tariffs as a quick fix. But in today’s world, their value is minimal and greatly outweighed by their negative consequences. We are better off working with partners internationally, trusting the process of global economic development, and keeping prices for consumers low. That’s the better path forward for America’s economy.