The Tariff of Abominations

It was on May 19th, 1828, that President John Quincy Adams, signed into law the tariff bill that gave the United States its highest tariffs, measured by percent of value. Tariffs have always played a significant role in US history. Starting in 1789 with a tariff to finance the Federal Government, they were the main source of revenue for over a century until Federal Income tax was introduced in 1913, following a constitutional change to enable it. At times they have been nearly 95 percent of federal revenues.

The 1828 tariff was very controversial because it was designed to protect the industry of the North from competition by cheap imports, while severely hitting the economies of the Southern states. The tariff introduced in the bill was 38 percent on 92 percent of all imported goods. This meant the South had to pay higher prices for their goods. They imported less from Britain in consequence, leaving the British less money with which to buy their cotton. Southerners dubbed it “The Tariff of Abominations,” and started proceedings to nullify it in some of their states. This itself led to a constitutional crisis.

President Adams feared it would undermine him politically, a fear subsequently justified when he was beaten by Andrew Jackson as he sought re-election later that year. There was a compromise of 1833, gradually reducing the tariff to a 20 percent level, but this, in turn, was reversed by the “Black Tariff” of 1842, which raised it to 40 percent to protect Northern producers from European competition.

President Trump seems to think that the tariffs he imposes on Chinese imports will be paid by the Chinese. In fact they are paid by Americans, who have to pay more for their imports. Furthermore, domestic producers in the US can now raise their prices in the absence of low-cost Chinese competition. Take steel, for example. The tariffs make steel more expensive to import for US producers. They can either pay the now higher prices, or turn to the already higher-priced domestic steel. Everything made with steel now becomes more expensive, meaning that prices rise within the US for domestic consumers of cars, fridges and the like, and US exporters find it harder to sell goods abroad.

The President seems to think that he Chinese exporters will simply absorb the tariffs and keep their prices low by taking lower profits. There is no evidence that this will happen. More likely, the Chinese will send to the EU the low-cost steel they cannot now sell in the US, thereby undercutting EU producers.

It is just possible that these tariffs are not intended to protect US producers, but to force the Chinese to modify their non-tariff barriers - such as the requirement for US firms operating in China to take Chinese partners and transfer their technology free of charge. If the tariffs are simply a bargaining chip of this nature, they might conceivably be justified, and might even work. But if they are designed to protect US producers, they will make life harder for US consumers, just as the 1828 Tariff of Abominations did, and just as its successors did.