Tariffs Mean Electoral Defeat for the GOP
The Trump administration is looking for an exit strategy from the most destructive parts of its trade war. The uncertainty is heightening the risk of a recession. Millions of business supply chains have been dismantled. The postwar trading system, responsible for 80 years of peace and prosperity, is in tatters. Some of the damage is irreversible. But if history is any guide, the latest protectionist experiment will soon be over.
While protectionists portray the 18th and 19th centuries as a happy period when Americans prospered behind tariff protections, nothing is further from the truth. Americans have historically hated high tariffs and never suffered them for long. Almost 300 years ago American colonists revolted against repeated British efforts to impose tariffs on American imports. Colonists defied the 1733 Molasses Tariff with widespread smuggling. Crying “taxation without representation,” they mounted a crusade against the 1767-68 Townshend Acts that forced Parliament to repeal them. The Tea Act of 1773 sparked the Boston Tea Party and was effectively repealed at Lexington and Concord.
Under the Articles of Confederation and the Constitution, the U.S. government had no power to tax income until 1913. Throughout the 19th century tariffs supplied 50% to 95% of federal revenue, but government was small and its revenue demands modest.
While Alexander Hamilton wanted to promote manufacturing with subsidies, which Congress opposed, he was skeptical of high tariffs. No revenue is collected on goods that aren’t legally imported, and Hamilton feared that tariffs would encourage domestic inefficiency. The rising demand for revenue to fund public works and a political effort to protect U.S. producers led to the “Tariff of Abominations” in 1828, which imposed an all-time high average tariff rate of 57.3%. In the following elections tariff supporters suffered devastating electoral defeats as Andrew Jackson and the Democrats were swept into power. From 1830-60 average tariff rates fell by 70%, and industrial production soared at an average annual rate of 6.2%. By 1860 average U.S. tariffs were among the lowest in the world.
In 1842 Congress adopted and Whig President John Tyler signed the so-called “Black Tariff,” the only significant effort to raise tariffs from 1830-60. But less than three months after the enactment of this tariff, the Whigs lost their majority in the House and three seats in the Senate. In the 1844 elections they lost the Senate majority and the presidency. The tariff was repealed.
With the coming of the Civil War, tariffs became a significant revenue source, but from 1870-90 average tariff rates fell by 30% and industrialization surged. The McKinley Tariff, enacted in October 1890, triggered a political bloodbath a month later when William McKinley and 92 other Republican representatives lost their seats and four Republican senators suffered the same fate. In 1892 Democrat Grover Cleveland was elected in a landslide. By 1895 the average tariff rate had fallen by a third.
In 1909 Republicans again raised tariffs with the passage of the Payne-Aldrich Tariff, and voters again revolted, taking the White House, 117 House seats and 13 Senate seats away from the Republicans in the 1910 and 1912 elections. The tariff was repealed and widespread hostility to tariffs helped fuel the passage of the 16th Amendment allowing for the levying of federal income taxes.
Farm exports soared during World War I, but by 1920 Europe was recovering and farm prices were falling. In 1922 Congress passed the Fordney-McCumber Tariff, which was initially meant to protect agriculture, but during its adoption a flurry of amendments broadened its coverage. The tariff failed to provide relief to farmers and in the 1922 elections Republicans lost 77 seats in the House and seven in the Senate.
The infamous Smoot-Hawley Tariff, enacted in 1930, helped transform a financial panic into a worldwide depression. The 1932 elections were cataclysmic for the Republicans, giving Democrats control of the White House for 20 years, the Senate for 44 of the next 48 years, and the House for 58 of the next 62 years. In 1934 Congress adopted the Reciprocal Trade Agreements Act, which delegated power to President Franklin D. Roosevelt to negotiate reciprocal trade reductions and back the world out of the Smoot-Hawley Tariff.
From 1934 until 2018, while minor tariffs and trade restrictions were imposed to relieve occasional political pressures, trade policy under 13 presidents reflected the belief that expanding trade benefits the U.S. The 85-year bipartisan trade consensus ended with the Trump tariffs in 2018. Those 2018 tariffs were tiny compared with the tariffs announced in the first 100 days of the second Trump administration. While numerous factors affect elections, tariffs didn’t prove a winning political issue in 2018, when Republicans lost the House, or in 2020, when they lost the Senate and White House.
Even if Mr. Trump negotiated his tariff increase down to 10%, that threefold increase in average U.S. tariff rates would raise consumer prices, disrupt domestic production, slow economic growth and prove toxic to Republicans in the midterm elections, which are less than 18 months away.
The clearest exit from this road to economic perdition is to reduce the tariffs by negotiating real reciprocal trade agreements. The U.S. should do so in return for its trading partners reducing tariffs on American goods and services. These reciprocal tariff reductions would lower prices and expand production and economic growth for the U.S. and our trading partners. We will miss that exit unless members of Congress and the administration remember that silence is consent.
Mr. Gramm is a nonresident senior fellow at the American Enterprise Institute. Mr. Boudreaux is a professor of economics at George Mason University. They are the authors of “The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism.” Mike Solon contributed to this article.