President Donald Trump has cited history to support his passion for levying import fees, and he has promised that more tariffs will follow.
Our wealth peaked between 1870 and 1913. We were a tariff nation at the time, and they later adopted an income-tax model. And how did that turn out, you know? Trump appeared to imply that tariffs were preferable to income taxes when he told reporters in the Oval Office on January 31 that “it’s fine, it’s OK, but it would have been very much better.”
That is by no means the only compliment Trump and his supporters have given to tariffs, the Gilded Age, and the eras immediately preceding and after it. Trump said in his inaugural speech on January 20 that William McKinley, the president from 1897 to 1901 and a prominent congressman prior to that, “made our country very rich through tariffs.”
Similarly, at a Trump campaign rally in October, Howard Lutnick, Trump’s choice for commerce secretary, claimed that America was magnificent 125 years ago when it “had no income tax, and all we had was tariffs.” Furthermore, this summer, Trump suggested enacting a “all-tariff policy” that would allow the United States to do away with income taxes.
Trump and his supporters are trying to increase support for the widespread application of tariffs while dealing with criticism from Wall Street and economists.
The late 19th and early 20th century economies are viewed differently by historians. Although it wasn’t at its wealthiest, the United States is said to have been dominant from 1870 to 1913. Furthermore, tariffs—which are normally paid by the businesses that import and frequently passed on to American consumers—were not the main reason for the nation’s better ranking.
It was “certainly a rising power, and through a long-term process, it was becoming more and more prosperous and bigger, better and more productive,” according to Chris Meissner, an economic history expert and professor at the University of California, Davis, around the time of the Gilded Age. But the professor noted, that’s not what Trump stated. “We were at our wealthiest, he remarked. “That’s not true,” Meissner said in an interview with BourseWatch.
Meissner suggested examining the evolution of the U.S. gross domestic product per capita throughout time as a means of evaluating richness, noting that it is currently far greater. Although GDP per capita “sounds fancy,” he explained, it just represents the typical household’s income.
Meissner’s opinion was mirrored by Troy Senik, the author of a biography of Grover Cleveland, the president of the United States in the 1880s and 1890s. In an email, Senik stated that it is “just flatly incorrect” to claim that we were at our wealthiest between 1870 and 1913. He cited the above chart, which shows that, after accounting for inflation, the U.S. GDP per capita is around six times bigger now than it was in those days.
Given the overwhelming consensus among economists that tariffs are “economically destructive,” Senik speculated that Trump may have sought “other outside sources of validation.”
“He seems to believe he’s found that in the Gilded Age, and William McKinley specifically,” Senik added. According to the Cleveland biographer, it’s strange to say that we were a tariff nation from 1870 to 1913 because, although protectionist taxes were a significant political concern at the time, the federal government had been using tariffs “pretty much from the country’s founding.” Although there was a federal income tax throughout the Civil War, it wasn’t until 1913 that it was implemented permanently.
Although life was improving for Americans in the lower and middle classes between 1870 and 1913, it was still more challenging than it is now because there were “very few protections for workers,” no minimum wage, no unemployment insurance, and no restrictions on working hours, according to Meissner. The Federal Reserve was founded in 1913 to stop or lessen financial crises and panics, although there were also more of them.
“The Great Depression served as the fault line, if you will, between those prior eras and modernity. The UC Davis economist told BourseWatch, “We learned during the Great Depression that you can’t run a modern economy like we used to run the 19th century.”
The tariffs weren’t the cause.
Historians say Trump is overemphasizing tariffs when discussing America’s advantages in the late 19th century.
“That was a period of great economic growth and prosperity, but that doesn’t necessarily mean it was because we were funding our government through tariffs as opposed to income tax,” said Robert W. Merry, who wrote the book “President McKinley: Architect of the American Century.”
According to Merry, a remark made by John B. Allen, a Republican senator from Washington state at the time, is illuminating.
“He said that both prosperous and poor economic periods have occurred, with both high and low tariffs. The tariff isn’t the end-all and be-all, in other words,” Merry told BourseWatch. “I think that’s one of the things that Trump doesn’t quite understand.”
“A number of factors contributed to America’s ascent. “The reason was not tariffs,” Meissner of UC Davis remarked. He said that immigration, education, and innovative growth were the main causes. Among the most important inventions of that time were the telephone, the typewriter, and the incandescent light bulb. “To those, we could add resources and just our cities, which were engines of diffusion of information.”
Meissner also noted that throughout American history, including in the late 1800s, tariffs were both supported and opposed.
“It’s worthwhile thinking about who the winners and losers are from tariffs,” he remarked. “We’ll implement tariffs if we want an economy that values lobbying and is on the verge of corruption, favoritism, and corporate welfare. However, I believe that low tariffs are the best mix if we desire efficiency and innovation.
Trump stated on January 31 that the further tariffs that are coming up might include those on natural gas (NG00) and oil (CL00) that went into effect on February 18. In addition, he stated that steel, copper (HG00), computer chips (SOXX), medicines (PJP), and goods from the European Union will also be subject to taxes in the upcoming months.
Following the implementation of Trump’s new 10% tax on Chinese imports, China is scheduled to impose retaliation tariffs on a number of American goods on Monday. Trump has consented to postpone hefty duties on imports from Canada and Mexico for 30 days. Additionally, he stated that in the upcoming week, he intends to announce reciprocal tariffs.
The Coalition for a Prosperous America, which supports Trump’s tariffs, argues that they are a “essential tool for rebuilding the U.S. industrial base, fostering long-term economic growth, and reducing dependence on foreign imports.”
