Ed Gresser, PPI’s Vice President and Director for Trade and Global Markets, published his trade fact of the week pushing back on a Trump Administration talking point around reciprocal tariffs.
The administration and Mr. Trump personally justify high tariffs not by alluding to the success of modern high-tariff countries, but by looking a long way back through the American past. To cite an eccentric and frequently repeated comment:
“In the 1890s our country was probably the wealthiest it ever was because it was a system of tariffs.”
What to make of this?
It’s true that America had high tariff rates in the 1890s. The U.S. International Trade Commission’s table of tariff rates back to 1891 shows a “trade-weighted average” tariff averaging 27.9% from 1891 to 1900, over ten times the 2.4% of 2023. It’s wrong, though, to say American wealth peaked relative to other countries, let alone in absolute terms, at that time. Based on the research of Angus Maddison et al., the U.S.’ share of ‘global GDP’ in the 1890s was probably around 15%. This is a lot higher than it had been before the Civil War (which was also a high-tariff period), but well below the levels of the 1950s and 1960s (after 30 years of steadily falling tariffs), and about the same as it is today. …
Gilded Age tariff system defenders argued that high tariffs protected Americans from “low-wage” European and Asian competition. Critics said it mainly protected monopolies, while encouraging political corruption and depressing middle-class living standards. Public opinion polls weren’t invented until the 1930s, so we don’t really know how the public in general felt. But opposition to high-tariff policy in the 1890s and 1900s was strong, organized, and persistent enough to convince 42 state legislatures to pass an amendment to the Constitution in 1913 authorizing the creation of the income tax, which replaced the tariff as the main federal revenue source.
So, not an era of wealth and not a tax policy the public loved. Nor a time anyone should want to revisit.