The above-linked Wikipedia article on tariffs includes a table of U.S. Historical Tariffs, from 1792 through 2010. It’s interesting to see how the steady decline in tariffs, especially beginning with the signing of the Global Agreement on Tariffs and Trade (GATT) in 1947, tracks closely with the steady demise of American manufacturing and our overall economy in general. Don’t pay much attention to the accompanying text, since it merely repeats many of the misconceptions about tariffs that are perpetuated by free trade-cheerleading economists. For example, there’s this:
The next peak in tariffs was due to the Smoot–Hawley Tariff Act of 1930 at the start of the Great Depression. It is generally believed this act with its high tariff rates prolonged the Great Depression under President Franklin D. Roosevelt of 1929-1939.
Look at the table again. The average tariff rate in 1930 was 19.2%. In 1918, just prior to the economic boom of the “roaring ’20s,” it was 31.2%. The average tariff rate from 1792 through 1928 was 20.4%. And we’re to believe that a tariff rate of 19.2% in 1930 “prolonged the Great Depression?” Such a claim is completely illogical. It doesn’t stand up to the most basic scrutiny.
Also, take a look at the “budget % tariff” column. Until the Civil War, when federal spending exploded to finance the war, tariff revenue accounted for nearly all of federal revenues. It fell to less than 50% during the Civil War but recovered to 57% of the federal budget by 1890. Following ratification of the 16th amendment in 1913, authorizing the federal income tax, tariff revenue as a percentage of the federal budget steadily declined, reaching a record low of 0.9% in 1944, where it has remained (approximately) since.
In 1948, the year following the signing of GATT, tariff rates fell by 30% to about 5.5%, where they remained until 1975, when they were cut in half. Not coincidentally, the U.S. has run an ever-growing trade deficit ever since that year.
Near the bottom of the Wikipedia article, in a discussion of the neoclassical model of trade and tariffs, comes this frank admission:
In the real world, as more imports replace domestic goods, they consume a larger fraction of available domestic wages, moving the graph towards this view of the model (where consumers are also producers and their purchasing power comes from wages earned in production). If new forms of production are not found in time, the nation will go bankrupt, and internal political pressures will lead to debt default, extreme tariffs, or worse.
Sound familiar? Our national debt is rising at a rate of $1 trillion per year. Last summer we came as close to defaulting on our debt as the nation has ever come. Is “extreme political pressures” for “extreme tariffs” next? One could only hope. Otherwise, the “or worse” will soon follow.