The United States relied heavily on tariffs as a primary source of government revenue during its early history, particularly in the 18th and 19th centuries. This practice began shortly after the nation’s founding and continued until the early 20th century when alternative revenue sources emerged.

The reliance on tariffs can be traced back to the Tariff Act of 1789, which was one of the first major pieces of legislation passed by Congress under the new Constitution. This act imposed tariffs on imported goods to generate revenue for the federal government and to provide some protection for domestic industries. At the time, tariffs became the government’s primary source of income, as the federal income tax had not yet been established.

During the 19th century, tariffs continued to play a central role in the U.S. economy. They served not only as a revenue source but also as a means of protecting American industries from foreign competition. For example, the Tariff of 1816 is often considered the first explicitly protective tariff. Later, the Tariff of Abominations in 1828 imposed high duties on imports, sparking intense political debate and contributing to the Nullification Crisis of the 1830s.

Following the Civil War, tariffs remained high to support the nation’s growing industries. This period, sometimes referred to as the “Great Tariff Period,” saw legislation such as the Morrill Tariff of 1861, which exemplified the use of tariffs to both raise revenue and protect domestic manufacturers.

However, the importance of tariffs as a primary source of revenue began to decline in the early 20th century. The introduction of the federal income tax in 1913, made possible by the ratification of the 16th Amendment, marked a significant shift in the federal government’s approach to funding. With the income tax providing an alternative and more robust source of revenue, tariffs became less critical to the government’s budget, though they continued to serve as a tool for protecting American industries.

Donald Trump bringing up William Mckinley as a towering figure in United States history comes has a surprise to many. I mean, when was the last time a President of this country was celebrated for anything other than winning a war. This is not business as usual. In fact no day with DJT is business as usual.

William McKinley was a strong proponent of protective tariffs and saw them as a vital tool for fostering economic growth and protecting American industries from foreign competition. As a congressman and later as president (1897–1901), McKinley played a key role in shaping tariff policy during a time when the U.S. heavily relied on them for government revenue. As a congressman, McKinley championed the McKinley Tariff of 1890, which raised duties to an average of nearly 50% on many imported goods. This was one of the highest tariff rates in U.S. history at the time. McKinley believed this level of protection would support American manufacturers, create jobs, and stimulate the economy by shielding domestic industries from foreign competition. During his presidency, he oversaw the passage of the Dingley Tariff Act of 1897, which replaced the Wilson-Gorman Tariff and further solidified high protective tariff rates. The Dingley Tariff remained the centerpiece of U.S. trade policy until the early 20th century.

Impact on Government Revenue

At the time of McKinley’s presidency, tariffs were a primary source of federal government revenue. Although precise annual figures can vary, during the late 19th century and the early 20th century, tariffs typically accounted for 40–50% of total federal revenue. The high tariff rates under McKinley’s policies significantly contributed to this proportion.

This reliance on tariff revenue continued until the introduction of the federal income tax in 1913, which marked a turning point in U.S. fiscal policy by shifting the primary source of government funding away from tariffs.

With more over $7.0 trillion in goods and services imported and exported in 2022, the US is the second-largest trading nation in the world, after China. Over 200 nations, territories, and regional organizations throughout the world have trading links with the United States. The world’s biggest importer of products is the United States. In 2022, the United States imported $3.2 trillion worth of goods from around the world, an increase of 14.6 percent ($413.7 billion) over 2021. With 16.5 percent of all imports, China was the United States’ largest provider of products.

(Source: Office of the United States Trade Representative, Countries & Regions )

A country could do with a $400 billion windfall, starting this year, year after year. This is half the yearly military budget of the United States, which is the single largest spending bill in any given year to a single entity, governmental or otherwise. But things might not be that simple. Other countries might retaliate, impose their own brand of tariffs and generate revenue of their own. In fact,  After China, the United States is the world’s second-largest exporter of goods. In 2022, the United States exported $2.1 trillion worth of goods to the world, a 17.5% increase ($307.3 billion) over 2021.

What if retaliation occurs across the board?

What is the net?

Doesn’t sound like much, does it. But the net revenue might be greater than one would anticipate, just because of the clout of US trade against the various countries of the world, compared to their power over the US. After all, economic coercion is one the Trump’s principal weapons to make it happen. Overall, it is worth the trouble? Look out for more on this, right here.