Message from the President

Tariffs are among the oldest taxes on the planet, and among the easiest to collect. Position the tax collectors on the docks, and don’t let the goods leave port until the duty has been paid.

The imposition of tariffs also led to smuggling because, hey, cheating the tax man is nothing new! The earliest history of our country is filled with stories about tariffs and smuggling. According to “Tariffs in American History” by John Steele Gordon, “Rhode Island, with its long coastline and its many small harbors, was the epicenter of colonial smuggling.”

In the early 1800s, Northern states were busy industrializing, and their elected representatives supported high tariffs, thus making imports from England and elsewhere expensive. Southerners, with their focus largely on agriculture, hated high tariffs, and so the rift between the states accelerated.

In 1828, then–Vice President John C. Calhoun of South Carolina wrote that “states had the right to nullify federal laws that they regarded as unconstitutional.” This led to the South Carolina legislature passing the Ordinance of Nullification and declaring the federal tariffs of 1828 and 1832 “to be null and void within the state boundaries.” President Jackson was having none of it and threatened military action if lawmakers in Columbia didn’t rescind the ordinance. And they did.

Fast-forward a little more than 100 years to the end of World War II, to 1944 to be exact, when the United States hosted the Bretton Woods Conference with representatives of 44 nations. Among the outcomes was an understanding that if countries opened and traded goods freely, the U.S. would oversee safe passage of goods and all would prosper.

That worked for many, but not all.

Today, as we debate tariffs and balanced trade, the imbalances are as clear as ever. Bangladesh, for example, is a huge producer of goods for the apparel industry. Thus, the trade imbalance between the U.S. and Bangladesh is substantial, as one would imagine. Imposing a 35% tariff and expecting a better balance of trade with a country with an annual per-person income of $2,800 is quite unlikely. They simply do not have the consumer income necessary to “rebalance” trade and become a place where American-made goods will find a thriving market.

The takeaway is this: rebalancing our trade position with countries around the world is quite complicated, and it will be years before much of this sorts itself out.