The Legacy of Tariffs in US history: Renewing the McKinley-Hawaii Strategy?

Gordon S. Barker

This is the second post in a series on tariffs based on a roundtable organized at Bishop’s University in February 2025. Read the introduction by David Webster here and the first post by Heather McKeen-Edwards here.

Donald Trump’s transactional use of tariffs does not break new ground. In fact, tariffs have played an instrumental role in American nation building for some two hundred and fifty years.  Tariffs were a hotly debated issue during the “Critical Period” under the Articles of Confederation as the New Republic sought to establish itself in the community of nations and build its own national market.  After the Philadelphia Convention of 1787 and the adoption of the American Constitution, tariffs lay at the heart of the controversies between Alexander Hamilton and Thomas Jefferson, which divided George Washington’s first administration.  Hamilton saw a tariff as an essential nation-building tool and set out his vision in the Report on Manufactures submitted to Congress in 1793.  Washington’s secretary of the treasury believed tariff protection, a national bank, and a program of internal improvements were key pillars for economic growth and positioning the New Nation in the global community.  In contrast, Jefferson rejected tariffs.  The Sage of Monticello embraced a vision of an agrarian republic that had access to low-cost manufacturing imports to provide the infrastructure needed to expand agricultural production and sustain commodity exports to international markets. 

Although tariffs remained an issue during the Jefferson and James Madison presidencies, the Panic of 1819 and the end of the so-called Era of Good Feelings set the stage for tariffs to once again take center stage, especially in a period of marked polarization that birthed the Second Party System that pitted Jackson’s Democrats and against Whigs who opposed Old Hickory and branded him King Andrew.  The tariff of 1828, which saw the average rate reach a record level of 49 percent, became known as the “Tariff of Abominations,” and uncompromising leaders railed against each other precipitating the Nullification Crisis and Jackson’s Force Bill, which resonated across an increasingly divided nation, even after the adoption of a compromise tariff in 1833 that lowered the average rate to about 20 percent.  Even at that level, however, the compromise tariff helped fuel sectional differences ignited also by Jackson’s Bank War and increasingly by the growing divide on the question of slavery in the western territories after the annexation of Texas, the Mexican Cession, and the Gadsden Purchase.

It was against this background that another economic downturn, branded the Panic of 1857, ushered in the Morill Tariff, which took the average tariff rate back up to 47 percent, marginally below the 1828 record, presumably to restore the health of northern industry and commerce, which had been devastated by the collapse of Northeast banks and insurance companies, as well as plummeting commodity prices—with the exception of cotton.  In a post-Dred Scott era of growing Southern Nationalism, the Morill Tariff accentuated sectional animosities, which worsened after the early morning shots at Fort Sumter, continued after Robert E. Lee’s surrender at Appomattox, and later contributed to the failure of Radical Reconstruction.   Confederates and their sympathizers in the North argued the Lincoln administration maintained the Morill Tariff to finance the war effort, and they stressed to English and European diplomats from whom they sought international recognition for the Confederacy that the Union tariff punished British and continental European exports.  The Morill Tariff thus became central in Civil War Era diplomacy, notably when Lincoln worried about a possible two-front war following the Trent Crisis with Britain that saw Lord Palmerston decide to fortify the Canadian border with 10,000 British regulars and expand Royal Navy’s Caribbean fleet. 

The rapid growth of the United States economy during the postbellum period, spurred by a second industrial revolution centered primarily in America and Germany, Gilded Age laissez-faire economic policy, and the realization of America’s Manifest Destiny from “Sea to Shining Sea” with transcontinental railroads spanning the continent reduced Republican and Democrat sensibilities on tariffs until the last decade of the nineteenth century.  In the 1890s, however, the tariff issue returned with a vengeance reflecting the importance of full lunch pails for workers following several major labor disputes, including the Homestead and Pullman strikes, and rising competition for control of international markets and raw materials in an era of imperialist competition between leading European nations and the United States.  In this competitive environment, tariffs also served as a means for American policymakers to respond to new and sometimes powerful lobbies.  The McKinley Tariff of 1890, for example, increased tariffs from an average of 38% to 50%, but it removed duties on sugar—initially a response to an appeal by American interests in Cuba.  The McKinley Tariff, however, also had important strategic implications for extending America’s reach into the Pacific through the annexation of Hawai’i, then an independent country.  Hawai’i and America had signed a reciprocal trade agreement some five years earlier, which gave Hawaiian sugar producers favorable access to the US market. When the McKinley Tariff eliminated duties on sugar, producers in Hawai’i lost their advantage and were forced to compete with low-cost producers in Cuba who were closer to America’s large eastern seaboard metropolitan markets and with domestic producers who were accorded a bounty to allow them to remain competitive in the American market.  The ramifications for the Hawaiian economy were dire and, not surprisingly, American sugar interests in the islands clamored for annexation, declaring it the only way to save a collapsing economy, despite strong protests from Native Hawaiians who feared immersion and assimilation by their dominating American neighbor—fears that cannot be divorced from those felt by Canadians today as they confront economic dislocations associated with the Trump administration’s tariff policy and a president calling for Canada to become the 51^st state and saying that is the only sure way for Canadian suppliers to have guaranteed free access to much-needed American markets.  The message for Canadians today—as it was for Hawaiians in the late nineteenth century—remains the same: full lunch pails can only be achieved by becoming part of America. 

The Wilson Gorman Tariff of 1894 saw a slight reduction in the McKinley Tariff, reflecting the Democratic Party’s desire for lower tariffs, but it also provided for a 2 percent income tax to offset the revenue loss from the tariff reduction.  Prior to 1932 and the emergence of an important labor constituency in the Democratic Party, Democrats consistently favored lower tariffs.  The Wilson Gorman Tariff’s 2 percent income tax, however, was declared unconstitutional.  It is also important to note that the Wilson Gorman Tariff was enacted at a time when the American economy struggled with the most significant economic downturn in the Nation’s history, the Great Depression of 1893-1896.  It was also a time when American expansionist policymakers had come to understand that America’s huge manufacturing plant and growing agricultural capabilities meant that America needed world markets to maintain operating rates, employment levels, and social stability, and, most important, that America would be the greatest beneficiary of free multilateral trading arrangements.  The nineteenth century thus ended with Secretary of State John Hay penning his “Open Door Notes” calling for open access to markets and raw materials not only in the Pacific Rim but also in Africa and Europe.  Hay’s Notes announced a new era of tariff management at home and abroad as a means of nation building and ensuring the advancement of American economic interests.  Tariff management required America to go global and United States leaders to call for lower tariffs worldwide.  In this vein, the 1913 Underwood Simmons Tariff, enacted after the Sixteenth Amendment, lowered the American tariff to an average of 25 percent and introduced an income tax.  The Underwood Simmons Tariff was instrumental in funding America’s participation in World War I.  It also later informed Woodrow Wilson’s 14-Point vision set out at Versailles.  

            As a troubled America cried out for a return to normalcy after the dislocation of World War I, a difficult readjustment to peace, and the devastating 1919 flu epidemic that swept the Atlantic World, the Republican administrations of Warren Harding and Calvin Coolidge embarked on a sharp turn away from America’s embrace of multilateralism and lower tariffs.  The Fordney McCumber Tariff of 1922 authorized the president to raise tariffs up to 50 percent, supposedly to provide American manufacturers needed protection and allow them to compete with foreign suppliers.  In the Republicans’ push for normalcy, they also adopted a regressive stance on immigration passing the Emergency Quota Acts of 1921 and 1924 as well as the National Origins Act of 1924 aimed specifically at restricting non-traditional Anglo-Protestant immigration. These policies shaped an era of renewed conservatism until the Great Crash of 1929 ushered in an economic collapse exacerbated by dust bowl conditions that further reduced agricultural production.  American manufacturers and farmers faced unprecedented declines in demand at home and abroad.  Ignoring advice from leading economists who counseled against enacting higher tariffs and lobbied the government and published newspaper articles denouncing tariffs, Herbert Hoover’s administration passed the Hawley-Smoot Tariff hitting some 900 manufacturing items and 70 farm products with average tariffs that rose from 40 to 60 percent.    

            It took a decade, including another downturn in 1937, the Roosevelt Recession, before American Gross National Product returned to pre-crash levels.  By this time, President Franklin Delano Roosevelt had framed his Atlantic Charter vision for America’s entry into the World War II and a new vision for the postwar world.  As Patrick Hearden so aptly points out, FDR sought to build an arsenal for democracy to confront “the nightmare of a closing world.”^[1]  The Atlantic Charter vision, agreed to with Winston Churchill off the shores of Newfoundland in 1941, was in many ways a reintroduction of Wilson’s embrace of multilateralism and free trade following World War I.  It appealed to Americans worried about postwar dislocations and perhaps slipping back into recession or even another prolonged depression.  Americans thus welcomed a free trading, multilateral world in which American industry and manufacturing would prosper, especially reconstructing war-torn landscapes in Europe and Japan and assuming global economic, political, and military leadership. In the final decade of the twentieth century, the very same American multilateralism, supported by Republicans and Democrats alike, underpinned the 1994 North American Free Trade Agreement (NAFTA) and sought to integrate the economies of the United States, Canada, and Mexico to contribute to their economic growth and the wellbeing of their populations.  More than two hundred years after the Founding, tariff management remains central to American nation building, international relations, and economic policy. This is particularly true given the increased integration of the American, Canadian, and Mexican economies post-NAFTA, which has effectively made supply chains in key North American manufacturing industries transnational.

 effectively made supply chains in key sectors transnational.

Gordon S. Baker is a graduate of McGill University (BA Distinction in Economics, BA Honours History) and the College of William and Mary (MA, PhD in History), Gordon S. Barker has been teaching at Bishop’s University since 2006.  He has authored three major books, several chapters in peer-reviewed volumes, as well as articles and reviews in leading scholarly journals.  His latest book, with Sophie A. Brady, is titled Black Women Freedom Fighters: Profiles in the Struggle Against Slavery (McFarland Publishers, 2025).

^[1] https://activehistory.ca/?p=41270&preview=1&_ppp=5e4b8723aa