Tariffs have a long and storied history in the U.S. Tariff proponents today are correct to point out that they were the primary source of revenue for the federal government in the pre-income-tax era. However, these same people conveniently neglect to mention that the federal government did next to nothing compared to what it does today.
This, however, is small potatoes compared to the other revisionist histories of tariffs in the U.S. Some have alleged that tariffs, not slavery, caused the Civil War. And while it is true that tariffs (particularly the Morrill Tariffs) did disproportionately harm the South to the benefit of the North, it is pretty clear from reading the letters of secession, as well as the broader history of the period, that this is just not true. (RELATED: Elon Musk Channels Milton Friedman’s Pencil: The Message of Free Trade)
But at a recent event, I heard a different claim: that tariffs actually won the Civil War for the North. The thinking goes that tariffs promoted domestic industry and that, with the high tariffs of the period, the North’s industrial sector blossomed under their protective umbrella into a powerhouse that the agrarian South simply could not defeat. In other words, “industry won the Civil War and tariffs enabled industry to grow, therefore tariffs won the Civil War for the North.”
This is a tired argument, advanced by the likes of Lyndon LaRouche and, more recently, members of the so-called “New Right” or National Conservatives. This “American System” of economics harkens back to the likes of Alexander Hamilton, Henry Clay, and Friedrich List, to name just a few. (RELATED: The ‘Most Bad’ Option: Trump’s Tariff Uncertainties)
This is perhaps the clearest example of a post hoc ergo propter hoc fallacy I have ever seen outside of a philosophy classroom. It is true that the North had significant advantages in terms of its industrial base, which allowed it to mass-produce the tools of war. Likewise, the North had significantly more extensive infrastructure, such as railroads, which allowed it to move its assets around the country much more quickly. However, the co-existence of “high tariffs” and “rapid growth in the industrial sector” does not imply that high tariffs caused the rapid growth. (RELATED: American Prosperity Depends on Free Trade)
The simple fact is that tariffs, themselves, did not cause the growth of industry in the North that won the Civil War. Far from it. However, this is not to say that tariffs played no role whatsoever.
To make my case, I need two simple propositions:
- There exists at least one legitimate role for government in society, at least in the 19th century.
- In order to fulfill its legitimate role(s), the government needs to spend money in some way, shape, or form.
I will not spend any time discussing what the particulars of the legitimate roles of government may be, as that question has already been argued for hundreds of years. One can think that the legitimate roles are expansive or limited; it does not matter for our purposes here.
Why Tariffs Made Sense in the 1800s
In the 19th century, raising revenue was incredibly difficult for the federal government. Hiring “tax collectors” to survey, e.g., income or sales, would have been expensive, and while it had been done historically, these people were often less-than-honest in their collection practices. A newly formed nation could hardly afford to be associated with dishonesty lest the whole Republic fall apart in its infancy.
Enter tariffs. Tariffs and other forms of import taxation provided a clear and easy way to raise revenues. The number of ports was limited and could be monitored with relative ease, and the goods coming off the ships could be assessed a tax before being allowed to leave the port. While the implementation of these tariffs was less than perfect (smugglers did find ways to unload their cargoes at places other than the ports), there was very little dishonesty on the part of the tariff collectors.
Thus, one could argue that insofar as the government at the time was performing its legitimate role(s), tariffs represented a sort of constrained optimization of raising sufficient revenues in order to finance these roles. This would imply, then, that to the extent tariffs enabled industry to flourish in the United States, it was because the revenues the tariffs collected enabled good governance, not because of the protectionism that they provided.
In fact, we have strong evidence that the tariffs actually inhibited industrial growth. In their new book on the matter, Don Boudreaux and Phil Gramm dispel this LaRouchian myth. They, and plenty of others, find that annual growth rates of the U.S. industrial sector were higher in periods where tariff rates were falling than in periods where tariff rates were rising. Tariffs may have financed the government, but lower tariffs impelled faster industrial growth.
We can compare the use of tariffs in the 1800s to medical practices of the same era. Doctors at the time performed surgeries in non-sterile environments and without the use of anesthesia. Clearly, it would be wrong of us, in 2025, to condemn them for doing so, as these doctors were doing the best that they could given the technologies of the time. But we should absolutely condemn a doctor performing surgery in a non-sterile environment and without the use of anesthesia today.
Likewise, we should not condemn the tariff proponents of the 1800s as they faced different constraints than we do today. But given that we have different means of taxation available today, we no longer have to use the destructive and counterproductive method of levying tariffs. We should absolutely condemn the use of tariffs as a means of promoting industry or raising revenue today, in 2025, when we have much better means of accomplishing both that do not come with the destruction that tariffs leave in their wake.
Why Was the North Industrialized?
So what caused the industrialization in the North and, particularly, the high industrialization in the North relative to the South? To my mind, there are two factors, both of which are simple economics.
First, the question is why industry grew so rapidly during this time in the United States in general. The answer here is simple: the United States was, economically, quite free from oppressive government regulation. Tax rates were incredibly low, and, given the minuscule size of the federal government back then, the amount of bureaucratic red tape to navigate was similarly minuscule.
We can get a sense of this by looking at federal outlays going back to the 1800s. In constant 2022 dollars, the federal government spent a mere $108.50 per person per year throughout the 19th century. With a population of 340.1 million people and a federal budget of $7 trillion, that figure now amounts to over $20,000. Without an overbearing federal government, industry flourished.
Second, to answer the question of why the North, in particular, experienced such high industrialization, we need to acknowledge the existence of this pesky thing called “snow.” In areas outside of the tropics, cold weather can often preclude agricultural activity while the ground is, in some cases, quite literally frozen. This leaves large swathes of people functionally unemployed or minimally employed until the spring thaw. Boston in the early 1800s provides evidence of exactly this.
Before the 1830s, Boston was primarily an agricultural economy. That all changed after Frederic Tudor ushered in a transformation of the entire region almost single-handedly with the ice trade. With so many workers essentially idling during the harsh Boston winters, Tudor provided these people (primarily men) with the opportunity to work in the ice industry. After some bumps and starts, his venture was so successful that he was given the moniker “The Ice King.” The infrastructure that his industry demanded, namely increased railroads, helped give rise to the boom in the industrial sector in Boston throughout the mid- to late-1800s.
In the South, however, where snow is an alien concept, no such imperative exists. Farmers can work the land year-round, and there is little need to industrialize in order to find employment. Because of this, we can readily understand that it was far cheaper to set up industry in the North than it was in the South because, for a large period of time, there would have been a sufficiently large number of people in the North looking for gainful employment that could be done indoors.
The 1800s were a period of high tariffs and rapid economic growth. They were also a period of tremendous economic freedom as evidenced by low tax rates, easy regulation, and (by today’s standards) a minuscule federal government. It was these latter factors that caused the rapid economic growth during the era, not the high tariffs.
Still, a person supporting tariffs in the 1800s should not be condemned. They faced constraints far different from those we face today. Tariffs had their time, and it would be foolish to deny this outright. But unfortunately for tariff proponents today, that time has passed. Tariffs are a rotten deal for the American people, both consumers and producers. It is time we accept that what may have been necessary in the 19th century has no place in the 21st.
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