On February 3, 2025, a panoramic view of shipping containers at the Port of Montreal in Canada was captured by photographer Andrej Ivanov for Getty Images. Meanwhile, on the global stage, President Donald Trump has implemented sweeping tariffs on China, effective as of Tuesday, while his ongoing threats cast a shadow over trade relations with other key partners like Canada, the European Union, and Mexico.
Many people are left pondering: how have tariffs historically been employed by the U.S., and is Trump’s approach an outlier?
### The ‘Three Rs’ of Tariffs
Since America’s inception in the 18th century, tariffs have been a key tool. In fact, the Tariff Act of 1789 was one of the first legislative moves by Congress. Over the years, tariffs have been used to serve three main objectives according to Douglas Irwin, an economics professor from Dartmouth College and former president of the Economic History Association. He categorizes them into what he calls the “three Rs”: revenue generation, trade restriction to protect local industries, and reciprocity to negotiate deals with other nations.
### Revenue Use of Tariffs
Tariffs essentially act as taxes on imports, paid by those importing goods into the U.S. These taxes have historically been a significant revenue stream for the federal government. For about a third of U.S. history — from its formation until the Civil War — tariffs were primarily utilized to fund the government, providing up to 90% of federal revenues during that era, Irwin says.
However, post-Civil War, this reliance dwindled as the government introduced other forms of taxation, like excise taxes. From then until 1913, when the income tax was established, tariffs still contributed to about half of the federal revenue. Additionally, as the government expanded with New Deal programs such as Social Security and increased defense expenditure during World War II and the Cold War, tariffs became less critical as a revenue source, says Kris James Mitchener, an economics professor at Santa Clara University.
Today, relying on tariffs to fund government activities, especially the military, is unfeasible, Mitchener notes.
### Restriction and Reciprocity
Between the Civil War and the Great Depression, tariffs served mainly as a restrictive measure to shield domestic industries from foreign competition, explains Irwin. The infamous Smoot-Hawley Tariff of 1930 imposed protective duties on 800-900 goods, constituting roughly a quarter of U.S. imports, Mitchener adds.
Tariffs have also been used as a bargaining tool in trade deals. For instance, the U.S.’s 1875 free-trade agreement with Hawaii allowed duty-free imports of Hawaiian sugar while granting the U.S. exclusive access to Pearl Harbor.
Post-World War II saw the rise of trade reciprocity. The U.S. played a significant role in establishing the General Agreement on Tariffs and Trade in 1948, creating a framework that led to lower tariffs globally.
### The Expansion of Presidential Tariff Powers
Prior to World War II, U.S. import taxes were quite high, occasionally reaching 60%, Irwin notes. They have remained low since around 1950. In the 2010s, before Trump’s presidency, tariffs averaged about 2-4%, according to Mitchener. President Trump aimed to revitalize tariffs, reversing the long-standing period of low duties since WWII, says Irwin.
Initially, Congress had the sole authority over tariffs. But the Reciprocal Trade Agreements Act of 1934 allowed presidents some negotiating power, marking a pivotal shift, explains Andrew Wender Cohen, a history professor at Syracuse University.
### The Unusual Nature of Trump’s Tariff Policy
Trump’s tariff policies stand out among modern presidents, says Cohen. Unlike his predecessors, Trump embraces all three tariff goals: revenue, restriction, and reciprocity. He has even hinted at using tariffs to replace income tax and claimed they would restore U.S. manufacturing jobs. However, these goals have inherent conflicts, notes Irwin. Using tariffs to restrict imports reduces their revenue-generating capacity since they shrink the taxable import base.
Additionally, Trump has made unconventional ties between trade policy and other national issues, such as linking drug crises to tariffs, Mitchener points out.
While other presidents like George W. Bush, Ronald Reagan, and Richard Nixon have also used tariffs to protect industries, Trump’s approach is broader, impacting entire countries, Irwin elaborates.
Trade agreements normally provide mechanisms for addressing unfair practices, allowing for justified tariff increases. Trump’s unilateral tariff measures, however, are without precedent, notes Cohen, marking a significant departure from the norm established since 1934.
