The Tariff of 1816 is notable as the first tariff passed by Congress explicitly for the purpose of protecting US manufactured items from foreign competition. Prior to the War of 1812, tariffs had primarily served to raise revenues to operate that national government. [1] Another outstanding aspect of the tariff was the strong support it received from the agrarian South. [2]
The bill was passed, in part, as a solution to the purely domestic matter of avoiding a projected federal deficit reported by Secretary of the Treasury Alexander J. Dallas. [3] International developments added a sense of urgency to the legislation: In 1816 there was widespread concern among Americans that war with Great Britain might be rekindled over economic and territorial issues. A tariff on manufactured goods, including war industry products, was deemed essential to national defense. [4][5]
The tariff was approved on April 27, 1816 as a temporary measure, authorized for only three years (until June 1819). Northern efforts to perpetuate the tariff in 1820, after tensions with Great Britain had eased, provoked a backlash among Southern legislators. The South consistently opposed protective tariffs during the remainder of the ante bellum period. [6]
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Trade restrictions imposed by Great Britain and France during the Napoleonic Wars; the US Embargo Act of 1807 and non-intercourse policies; as well as the War of 1812: all these crises forced Americans to develop domestic manufactures to provide goods formerly supplied by Europe. Through necessity American domestic industries had grown and diversified significantly, especially cotton and woolen textiles, and iron production. [7]
Sectional characteristics of the country were also taking shape: the Northeast was transitioning from trade towards industrial enterprises; the Deep South concentrating on cotton production, and the West developing transportation routes to market their agricultural goods. [8]
Despite these sectional developments, America emerged from the War of 1812 as a young nation-state, with a renewed sense of self-reliance and common identity. [9]
The Treaty of Ghent did not resolve outstanding US-British boundary and territorial disputes in the Louisiana Purchase and Florida. Frontier issues remained flashpoints for conflict. [10] British economic aggression persisted. In efforts to recapture American markets, Great Britain proceeded to systematically flood the US market with superior manufactured items at cut-rate prices, the purpose of which was to drive American manufacturers out of business. [11] [12]
These geopolitical provocations influenced US domestic policies. The strict constructionism ideologists of the dominant Republican Party - though averse to concentrating power into the hands of the federal government - recognized the expediency of nationalizing certain institutions and projects as a means of achieving national security. [13]
In his Seventh Annual Message to the Fourteenth Congress on December 5, 1815, President James Madison suggested legislation to create a national bank with regulatory powers; a program of federally funded internal improvements for roads and canals, and a protective tariff to shelter emerging American manufacturing from the advanced industries in Europe. [14]
In December of 1815, Secretary Dallas presented a federal budget report to Congress projecting a substantial federal deficit by the end of 1816. Though his budget figures were not in dispute, the means of raising the funds were. Direct or excise taxes were ruled out. [15]
Dallas’ call for a mild protective tariff to forestall the deficit provoked opposition from two economic sectors: commerce and agriculture [16] [17]
Maritime centers in New England and the Mid-Atlantic states saw opportunities to profit from shipping imports and exports with the reopening of European and global markets. [18]A protective tariff might lead to retaliatory measures, impeding free trade. [19]
Agrarians in all regions of the US were also advocates of free trade. Northerners, like most Southerners, were still farmers (84% for the whole country). The North, however, was increasingly industrial, with 20 percent of its workforce engaged in manufacturing, compared to 8 percent in the South.[7] Southerners, committed to a pastoral slave-based culture and economy, were net consumers of manufactured goods – goods which would cost more under a tariff regime, and initially opposed the tariff. [20]
Manufacturing interests, the immediate beneficiaries of the tariff, favored the legislation, particularly in Pennsylvania and New York where manufacturing industry was growing rapidly.
The tariff was also popular in the Kentucky, among those who hoped to develop new textile industries weaving locally grown hemp. [21][22]
The tariff was retained until 1824 when it was massively increased. In 1828, the so-called "Tariff of Abominations" was introduced increasing the rate of tariffs significantly to assist Northern manufacturers. This was massively unpopular as it raised the costs of production significantly. Further, as the measure increased the price of cotton goods, British textile manufacturers sold less in the U.S. and reduced their purchases from Southern cotton growers accordingly. This tariff was massively unpopular in the South and opposition was led by Calhoun, who was then Vice President and broke with President John Quincy Adams over the issue. Calhoun then became Vice President under Andrew Jackson, who introduced the Tariff of 1832. This measure reduced the level of tariffs somewhat, but not enough to satisfy Calhoun. He resigned in order to become a Senator for South Carolina. This prompting the Nullification Crisis, in which South Carolina declared the 1828 and 1832 tariffs "null and void," and began to raise a military force in support of its action. The crisis was averted through the Compromise of 1833 negotiated by Clay where tariff rates were progressively returned to the level of the Dallas tariff by 1842. This averted further threats of nullification although the debate was a precursor to the arguments over slavery in the future.
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