What Was McKinley's Tariff Revolution?
Can 47/45 bring the golden age to American history?
The Tariff Policies of President McKinley: A Financial Revolution in American History
President William McKinley, the 25th President of the United States, is often remembered for his significant role in shaping American economic policy during the late 19th century. One of the most notable aspects of his presidency was his approach to tariffs. This essay explores whether President McKinley raised more tariff money than any other president, examining the economic context, key legislation, and implications of his tariff policies.
Introduction
When Alexander Hamilton became the nation’s first Secretary of the Treasury, he immediately began to prepare a schedule of tariffs, along with excise taxes on such commodities as alcohol and tobacco.
“Hamilton’s tariffs, along with the refunding of the national debt and the establishment of a central bank, transformed the American financial situation. By the end of the 1790s, the U.S. had the best credit rating in Europe, its bonds selling over par. By 1800, federal revenues, a mere $3.7 million in 1792, had nearly tripled to $10.8 million. About 90 percent of that revenue came from tariffs—a ratio that wouldn’t change much, except during the Civil War, for more than a century.”
“With the outbreak of war in 1861, government expenses exploded. Prior to the firing on Fort Sumter, the federal government had been spending about $172,000 a day. By the Battle of Bull Run three months later, the War Department alone was spending $1 million a day. While much of the cost of the war could be thrown onto the future by selling bonds, taxes—including tariffs—rose sharply as well. There were also new taxes, such as the country’s first income tax and a stamp tax on legal documents.”
By the late 1800s, which marked a transformative period in American history, the nation was rapidly industrializing and expanding its global influence. At the heart of this transformation was the debate over tariffs, which were taxes imposed on imported goods. These tariffs were intended to protect American industries from foreign competition while generating revenue for the government. McKinley’s presidency (1897-1901) was a pivotal time in this debate, as he implemented policies that significantly impacted tariff revenues. This essay delves into McKinley's tariff policies, compares them with those of his predecessors and successors, and assesses whether he truly raised more tariff money than anyone else.
Of course, most of us are not interested in McKinley per se, but we want to know if tariffs work, and for that question, we can consider Adam Smith, the father of capitalism, and, whether President Trump’s policies will work and if they are consistent with the theory of capitalism.
In today’s complex global economy, the U.S. tariffs against China have stirred debate. Often labeled as protectionist, these tariffs of up to 145% can find justification in the insights of Adam Smith, a giant of liberal economic thought. Surprisingly, Smith’s nuanced approach in his seminal work, The Wealth of Nations (1776), offers a perspective aligning with current tariff strategies.
CHINA CLOSED
For 47, the intent behind U.S. tariffs is to correct a skewed trade relationship with China, characterized by a massive trade deficit—$400 billion back in 2018 before tariffs—and systematic intellectual property theft by Beijing. The dependence on China for vital sectors during the pandemic made it obvious that the US depended on the global supply chain economy. Likewise, critical components like steel and semiconductors raise strategic concerns. Let’s take a closer look at what Smith had in mind.
FIRST EXCEPTION: NATIONAL DEFENSE
Smith did recognize exceptions, particularly concerning national defense—a principle echoed in US Monroe Doctrine, and subsequent historic American principles. Citing the Navigation Acts, Smith highlighted the importance of strategic regulation over mere wealth accumulation. In taxing Chinese steel, the Trump administration aimed to reduce reliance on a geopolitical rival. With China producing half of the world’s steel, often with Communist government subsidies, America’s strategic production capabilities could be compromised—an argument Smith would understand.
Moreover, trade requires reciprocity. China’s non-tariff barriers have effectively closed its market to Western companies, leaving the West to finance its rise. This is not a fair exchange, but a one-sided benefit favoring China. During the Clinton administration and deciding on its Most Favored Nation status, Clinton and the West gambled that Communist China would play by the rules. Now, that the Communists have not, for decades Washington, D.C. did nothing to prevent the hollowing out of working class folks.
SECOND EXCEPTION: RETALIATION AGAINST CLOSED COUNTRIES
Smith supported retaliation against uncooperative trade partners. He argued that such measures could prompt the removal of prohibitive barriers, ultimately benefiting trade. The goal of American tariffs was to push China into negotiations. The resulting Phase 1 agreement in 2020 saw China promise greater market openness and intellectual property protection, although with limited follow-through. Nonetheless, Smith would have approved the effort to level the playing field. I think it’s important to keep in mind that 47’s efforts are reciprocal tariffs and he is not initiating a tariff war but is responding to an exceptionally closed nation.
THIRD REALITY: SMITH’S HATRED OF NON-TARIFF BARRIERS
Smith detested non-tariff barriers, which he saw as underhanded tactics to stifle competition. China’s strategic use of technical trade barriers exemplifies this issue. Such practices, cloaked as legitimate policy, serve dual purposes: plausible deniability and significant impact. These are the hidden tactics of the malevolent.
We should consider our present situation with a period in American history when the economics of tariffs worked.
The Economic Context of McKinley’s Presidency
To understand McKinley’s tariff policies, it is essential to consider the economic landscape of the United States at the end of the 19th century. The country was undergoing rapid industrial growth, and the demand for protective tariffs was a response to the challenges faced by American manufacturers. Many industries, particularly steel and textiles, were struggling to compete with cheaper imported goods. This led to a growing sentiment among businessmen and politicians that tariffs were necessary to bolster the domestic economy.
Moreover, the economic situation was exacerbated by the Panic of 1893, a severe economic depression that heightened the calls for protective measures. The Republican Party, which McKinley represented, championed high tariffs as a means to stimulate economic growth and protect American jobs. McKinley himself was a staunch advocate for tariffs, believing they were essential for the nation’s prosperity.
The Dingley Tariff Act of 1897
One of McKinley’s most significant contributions to tariff policy was the Dingley Tariff Act of 1897. This legislation raised tariffs to unprecedented levels, repealing the Wilson-Gorman Tariff of 1894, which had lowered rates. The Dingley Tariff raised average rates to about 50%, making it one of the highest tariffs in U.S. history at that time.
Key Features of the Dingley Tariff
The Dingley Tariff included several important provisions:
Increased Tariff Rates: The act raised tariffs on a wide range of goods, including agricultural products, textiles, and manufactured items. This was designed to protect American industries and farmers from foreign competition.
Revenue Generation: The Dingley Tariff aimed to generate revenue for the federal government. With the economic turmoil of the 1890s, the government was in need of funds to support its operations.
Protection for Specific Industries: The tariff included specific provisions to protect key industries, such as iron and steel, which were vital for the nation's industrial ambitions.
Impact of the Dingley Tariff
The Dingley Tariff had a significant impact on tariff revenues. In the years following its implementation, tariff collections surged, reaching an all-time high. By 1900, the government collected approximately $200 million in tariff revenues, a record amount that underscored the effectiveness of McKinley’s policies.
To explore President William McKinley's tariff policies, particularly the McKinley Tariff Act of 1890, several peer-reviewed works provide valuable insights.
One notable source is an article that examines the global implications of the McKinley Tariff, arguing that it played a crucial role in challenging Britain's free trade policies and fostering a more protectionist approach within the British Empire. This piece highlights how the tariff influenced not just American policy but also the broader dynamics of global trade and imperialism during that era (Palen, 2010).
Additionally, discussions surrounding the constitutionality of the McKinley Tariff's reciprocity clause are critical. This analysis raises important questions about the delegation of legislative powers to the Executive Branch, which remains a significant aspect of understanding the tariff's legislative context (Patterson, 1892).
For a more focused examination of McKinley’s presidency and its impact on legislation, including the Sherman Anti-Trust Act and the McKinley Tariff, the interpretive study of Benjamin Harrison’s administration provides context on how these policies were perceived and implemented during McKinley's term (Socolofsky & Spetter, 1987).
These works collectively offer a comprehensive view of McKinley's tariff policies from various angles, including legal, economic, and historical perspectives.
Comparison with Other Presidents
To determine if McKinley raised more tariff money than any other president, it is essential to compare his administration's revenue from tariffs with those of his predecessors and successors.
Pre-McKinley Tariff Policies
Before McKinley, several presidents implemented varying tariff rates:
Abraham Lincoln: The Morrill Tariff of 1861 raised rates significantly to support the Union during the Civil War, but the revenue was lower compared to McKinley’s later achievements.
Grover Cleveland: He was known for his anti-tariff stance and reduced tariffs during his presidency. This led to lower tariff revenues, highlighting the contrast with McKinley's approach.
McKinley’s Revenue Record
McKinley’s Dingley Tariff Act led to record-high tariff revenues, which can be attributed to the combination of high rates and a recovering economy. It is estimated that during McKinley’s term, tariff revenue constituted around 50% of the federal government’s total income.
The Subsequent Tariff Policies
Following McKinley, President Theodore Roosevelt maintained high tariffs, but the peak revenue levels set during McKinley’s term were not surpassed until the 1920s. The Payne-Aldrich Tariff of 1909 did not raise rates significantly, indicating that McKinley’s policies left a lasting legacy in tariff revenue generation.
External Revenue Service vs. IRS
The federal government taxed Americans with the Internal Revenue Service (IRS) in addition to tariffs for several reasons:
1. Tariffs were not sufficient to meet the government's revenue needs: While tariffs were an important source of revenue, they were not enough to meet the government's growing expenses, particularly during times of war or economic downturn.
2. Tariffs were regressive: Tariffs disproportionately affected the poor and working class, who spent a larger percentage of their income on imported goods. The federal government wanted to find a more equitable way to raise revenue.
3. The government needed a more stable source of revenue: Tariffs were highly volatile, as they were affected by changes in international trade and economic conditions. The government needed a more stable source of revenue to fund its activities.
4. The government wanted to reduce its reliance on tariffs: The government recognized that tariffs were not a sustainable source of revenue and wanted to reduce its reliance on them. By creating the IRS, the government could raise revenue from a broader base of taxpayers, including individuals and businesses.
5. The government wanted to increase its ability to redistribute wealth: The government believed that by taxing individuals and businesses, it could redistribute wealth and reduce income inequality. The IRS allowed the government to target higher-income individuals and corporations, which were seen as having a greater ability to pay taxes.
In summary, the creation of the IRS was a response to the limitations of the tariff system and the need for a more stable and equitable source of revenue.
Many cite the Smoot-Hawley Tariff Act of 1930, insisting that this caused an economic downfall. However, it came eight months after the Great Crash and the start of the Depression. One may argue—credibly—that Smoot-Hawley protectionism was a terrible idea once the Depression had begun, but that’s not what those who criticize Donald Trump said. He said that the Depression could have been avoided if the federal government had not enacted an income tax and had stuck with its pre-1913 tax system. This is unorthodox, but it isn’t necessarily false.
“The causes of the Great Depression were numerous, varied, and, in some cases, are still hotly debated. Inarguably, however, the factors that played the greatest role in the Depression’s formation were financial corruption and attendant speculation. Money was plentiful, which meant that it was treated carelessly and was spent and invested frivolously and recklessly. Part of the reason money was plentiful was the fact that the United States escaped World War I largely unscathed while Europe was devastated. But that was not the only reason. Consider, for example, what we know about income taxes and their effect on the federal government.
Just weeks before Woodrow Wilson was inaugurated as the nation’s 28th president, William Howard Taft’s Attorney General (Philander Knox) signed the 16th Amendment to the Constitution, which read in its entirety, `The Congress shall have power to lay and collect taxes on incomes from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration’” (Cf. https://amgreatness.com/2025/04/05/what-trump-got-right-and-wrong-about-the-income-tax/?utm_medium=email&utm_source=act_eng&seyid=61810).
Equity as Economic Policy
The Progressives, a political movement that emerged in the late 19th and early 20th centuries, generally favored the Internal Revenue Service (IRS) over tariffs as a means of raising revenue for the federal government.
Progressives believed that tariffs were regressive, meaning they disproportionately affected the poor and working class, who spent a larger percentage of their income on imported goods. They also believed that tariffs were a form of protectionism that benefited special interest groups, such as manufacturers and farmers, at the expense of consumers.
In contrast, the Progressives saw the IRS as a more equitable and efficient way to raise revenue. They believed that a graduated income tax, which taxed higher-income individuals and corporations at a higher rate, was a more progressive and fair way to fund government programs.
Many Progressives, including President Theodore Roosevelt and his successor, President William Howard Taft, supported the creation of the 16th Amendment to the Constitution, which authorized the federal government to impose a graduated income tax. The amendment was ratified in 1913 and led to the establishment of the modern income tax system in the United States.
In conclusion, the Progressives favored the IRS over tariffs as a means of raising revenue because they believed it was a more equitable and efficient way to fund government programs and reduce income inequality.
Free Trade vs. Tariffs
Free trade and libertarian arguments against tariffs are based on the idea that tariffs are a form of protectionism that can harm the economy and individuals. Here are some of the key arguments:
1. Protectionism: Tariffs are a form of protectionism that can lead to a decrease in trade and economic growth. By imposing tariffs on imported goods, governments are essentially creating a barrier to trade, which can lead to higher prices for consumers and reduced competition for domestic producers.
2. Higher prices: Tariffs can lead to higher prices for consumers, as domestic producers are able to charge higher prices for their goods due to the protection provided by the tariffs. This can be particularly harmful for low-income households, who may not have the same level of disposable income to absorb higher prices.
3. Reduced competition: Tariffs can reduce competition in the market, as domestic producers are able to maintain their market share and prices without having to compete with foreign producers. This can lead to a lack of innovation and reduced efficiency in the industry.
4. Job losses: Tariffs can lead to job losses, as domestic producers may not be able to compete with foreign producers who are able to produce goods at a lower cost. This can be particularly harmful for workers in industries that are heavily reliant on imports.
5. Inefficient allocation of resources: Tariffs can lead to an inefficient allocation of resources, as domestic producers are able to produce goods that may not be the most efficient or cost-effective. This can lead to a waste of resources and a decrease in overall economic efficiency.
6. Retaliation: Tariffs can lead to retaliation from other countries, which can lead to a trade war. This can have negative consequences for the economy, as trade wars can lead to a decrease in trade and economic growth.
7. Lack of transparency: Tariffs can be difficult to understand and navigate, as they can be complex and subject to change. This can lead to a lack of transparency and accountability in the trade process.
8. Inequitable distribution of benefits: Tariffs can lead to an inequitable distribution of benefits, as the benefits of the tariffs may not be shared equally among all stakeholders. This can lead to a lack of fairness and justice in the trade process.
Michael Pettis was one of the few heretics of globalization who didn't buy into the inevitability of Chinese economic imperialism. He left Wall Street in 2002, and he didn’t expect to stay more than a few years. But China just was too interesting and I never got around to leaving,” he later said. Pettis landed a professorship at Peking University and became a source for the many reporters and scholars who came through Beijing, helping them understand the political and corporate dynamics that were driving that country’s astonishing rise as an economic power.
Free trade and libertarian arguments against tariffs are based on the idea that tariffs are a form of protectionism that can harm the economy and individuals. They argue that tariffs can lead to higher prices, reduced competition, job losses, and an inefficient allocation of resources, and that they can lead to a lack of transparency and accountability in the trade process.
Anecdotes of Economic Growth
The effects of McKinley’s tariff policies can be illustrated through various anecdotes of economic growth during his presidency. For instance, the steel industry flourished under the protection of high tariffs. Companies like U.S. Steel expanded rapidly, creating thousands of jobs and contributing to the booming economy.
Farmers also benefited from the Dingley Tariff, as it protected agricultural prices from cheaper imports. The prosperity seen during McKinley’s administration can often be traced back to the stability provided by his tariff policies.
Criticism and Controversy
While McKinley’s tariff policies were successful in raising revenue and protecting American industries, they were not without controversy. Critics argued that high tariffs led to higher prices for consumers, as domestic producers faced less competition. Moreover, the reliance on tariff revenues made the economy vulnerable to fluctuations in trade policy.
The debate over tariffs continued long after McKinley’s presidency, shaping the future economic landscape of the United States. The lessons learned from his administration’s policies still resonate today, as discussions about trade, protectionism, and revenue generation remain central to American economic discourse.
The American issue for decades has been deindustrialization.
A Short History of Recent Tariffs
As Michael Serven writes: “A Brief History of US-Led Global Orders
The deindustrialization trend didn't happen in a vacuum; it unfolded under two distinct global orders, both architected by the US. Understanding them is key to understanding Trump's plan today.
The Bretton Woods Order (Approx. 1944-1973):
Born from WWII's ashes, it aimed for stability and reconstruction.
The Deal for Allies (Green Bucket v1.0): Fix your currency to the US dollar (itself tied to gold), rely on the US for military protection (NATO, US-Japan treaty), and the US will help you rebuild (Marshall Plan, favorable market access even while allies shielded their own markets).
The US Payoff: Contained communism with strong allies, created rich export markets for US goods, and cemented the US dollar as the global reserve currency, granting the "exorbitant privilege" (France's term) – the ability to spend more abroad than earned without facing a currency crisis, thanks to global demand for dollars.
The Downfall (Triffin Dilemma): The growing global economy needed more dollars than the US gold reserves could credibly back. Choosing between creating more dollars (debasing the gold link) or restricting dollar supply (killing global growth) led Nixon to suspend gold convertibility in 1971, ending the system.
The Neoliberal Order (Approx. 1980s-2016):
Ushered in by Reagan and Thatcher, characterized by: Lower tariffs, fewer investment barriers, flexible exchange rates, and broad US security guarantees for anyone playing by market rules.
The New Deal: Less structured. Countries used the dollar out of convenience and reliability. Any nation could gain access to the vast US consumer market and US Navy protection by joining the WTO system. Developing nations often got preferential tariff treatment (hoping wealth would make them friendly, like post-WWII Germany/Japan).
The US Payoff (Exorbitant Privilege on Steroids): With flexible exchange rates, Miran argues, global demand for dollar assets pushed the currency's value far higher than needed for balanced trade. This strong dollar funded the US military globally and made Americans richer on average.
The Downside: The strong dollar made US manufacturing uncompetitive, accelerating deindustrialization (the "China Shock" post-2001 WTO entry was brutal). It also primarily benefited asset holders, worsening inequality. This combination fueled Trump's 2016 election, arguably marking the end of the unquestioned neoliberal consensus.”
Scott Bessent explains the urgency of Trump’s “economic rebalancing [and] it’s critical to understand why it is necessary in the first place. The early 2000s represented the high-water mark of neoliberalism—the `end of history’ in which despotism would give way to democracy and free trade.
Not coincidentally, this period also marked China’s rise in global commerce after joining the World Trade Organization in 2001. Economists David Autor, David Dorn, and Gordon Hanson identified the `China Shock’ in a 2016 paper on the uneven effects of trade liberalization: 3.7 million Americans lost their jobs. Offshoring production to China accounted for 59.3% of U.S. manufacturing job losses, and most of these workers entered long-term unemployment.
Proponents of this wrecking-ball policy argued for making up its losses through wealth redistribution—as if a handout could heal the families and communities shattered by outsourcing. In the ultimate show of condescension, some academics labeled this the “compensate the losers” strategy. It failed miserably.
Even though the price of consumer goods declined, the cost of living increased as housing, education and medical-insurance costs soared. Millions of Americans experienced an absolute decline in real income. Every leading politician ignored the national rupture caused by globalization, until Donald Trump.”
Some specific examples leading to this point should suffice.
There was the retaliatory chicken tax in 1964. West Germany placed tariffs on our poultry, so LBJ responded with a 25% tariff on light trucks.
Ronald Reagan believed in free trade bona fides, yet he imposed a 45% tariff on imported motorcycles to protect Harley-Davidson. Japanese bikes were overtaking the market. The motorcycle tariff, as it became known, expired in 1988.
Clyde Prestowitz was a skeptic of globalization during the boom years of neoliberalism, and he dealt directly with other countries in trade negotiations.
In the 1980s, Prestowitz was an official in Ronald Reagan’s Commerce Department, back when Japan, not China, was the trading partner the U.S. most feared. Japanese autos, televisions, washing machines, and all sorts of consumer electronics were flooding into the U.S., forcing American auto makers to close factories and even putting U.S. companies like Zenith out of business. Yet Japan was using tariffs and other less obvious trade barriers to prevent U.S. companies from exporting many of their products to Japan. It was protecting certain key industries from foreign competition.
This was not how the rules of free trade were supposed to work. Prying that market open, forcing Japan to play by the same rules as the U.S., was Prestowitz’s job.
President George W. Bush imposed tariffs on steel because countries were “dumping” steel in the U.S. at below-market prices. Steel companies were filing bankruptcy and laying off workers. It seemed so obvious that something needed to be done.
Companies that need steel were used to cheap prices, and they suddenly had to pay higher prices. There are plenty of studies that say those companies lost more jobs than the number of people employed in the steel-producing industry.
On March 5, 2002, President George W. Bush imposes tariffs on steel, targeting China, Japan, South Korea, Taiwan, Germany and Brazil. They are to last for three years, starting at 30% and tapering to 18% in the third year.
The World Trade Organization, formed in 1995, eventually ruled the Bush tariffs were illegal. It’s ruled against America a lot, leading to accusations of anti-American bias.
Bush rescinds the steel tariffs on Dec. 4 2003. The decision comes nearly a month after the World Trade Organization rules the tariffs were illegal, and gives countries they targeted the right to impose $2.2 billion in retaliatory tariffs.
“The President's complete lack of mettle in calling the W.T.O.'s bluff ignores the continuing damage being done," said Leo Gerard, the president of the United Steelworkers of America.
In 2009, Obama imposed 35% tariffs on Chinese tires. At the time, Goodyear had tire plants in Buffalo and Niagara Falls. The plant in Buffalo has since shut down.
On September 11, 2009, Obama imposed a three-year tariff on Chinese tires that had been flooding the market since 2004. The tariffs start at 35% and go down to 25% by the third year.
The New York Times reports that four tire plants have shut down and more are scheduled to close.
There has to be a rebalancing of trade because if there isn’t, the alternative is that the trade surplus becomes bigger than global GDP, which is impossible. You can’t do it forever. And if a rebalancing doesn’t happen, eventually a trade war is inevitable.
In 2014, Michael Pettis made this argument with a book entitled The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy.
The United Steelworkers Union says the tariffs stabilized the American tire industry. Chinese imports dropped significantly, but tires from South Korea, Taiwan, and Indonesia took their place, the Los Angeles Times reports in this 2016 story, which was pegged to Trump talking about tariffs on the campaign trail.
2016 was a turning point, according to Gary Gerstle, an economic historian at the University of Cambridge and author of The Rise and Fall of the Neoliberal Order.
On the left, there had always been calls for more protectionist policies, even if they were largely ignored. Suddenly, thanks to Bernie Sanders, who ran for president that year and was enthusiastically backed by millions of working-class Democrats, it was unignorable.
On the right was Trump. Trump had always been anti-free trade; in 1987, he took out ads accusing Japan of ripping off the U.S., not that anyone cared until he ran for president. In a speech to Pennsylvania steelworkers during a campaign stop in 2016, Trump declared that America’s elites had betrayed them: “Our politicians have aggressively pursued a policy of globalization—moving our jobs, our wealth, and our factories to Mexico and overseas.”
Economists David Dorn, Gordon Hanson, and David Autor set out to investigate what happened to workers when U.S. factories were closed and the work moved to China.
The three economists estimated that America has lost more than 2 million jobs to China. In the grand scheme, that wasn’t a lot, but for the hardest-hit localities, it was ruinous.
As the authors put it in their paper, “Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences.” Autor told me that the key point was that “we weren’t moving people into other sectors to keep them employed.” When factories closed, the workers didn’t adjust. They suffered.
The paper became known as “The China Shock Paper,” and its influence among free-trade economists was enormous.
During Trump’s first term, his trade representative was Robert Lighthizer, a former aide to Kansas Senator Bob Dole, and a China hard-liner. Trump did not believe that dialogue was the way to rebalance trade with China. He believed in blunt criticism and tariffs. Beginning in 2018, he placed a 25 percent tariff on many Chinese goods, a tariff that Joe Biden maintained when he came into office. By then, there was broad agreement that the U.S. had to confront China directly.
Serven notes: “First Term Failures & The Current Dilemma
Trump's first trade war (mostly targeting China) failed to stop deindustrialization or China's industrial rise, partly due to retaliation and trade rerouting. Biden's subsequent massive subsidies (IRA, CHIPS Act) spurred factory construction but ballooned the deficit without solving the underlying competitiveness issue caused by the strong dollar, according to Bessent and Miran.
This leaves the Trump team facing the core dilemma: The neoliberal order secured US global power and wealth via the dollar's exorbitant privilege, but at the cost of strategic industrial decline. How do you reverse deindustrialization without sacrificing the dollar's reserve status and the power it confers? As Trump himself said, losing the reserve currency means "third world status."
Most economists believe these two goals are fundamentally incompatible. But Miran's work suggests a path – a way to have your cake and eat it too.”
There were specific attempts during Trump’s first term.
On Jan. 22, 2018 Trump announces tariffs of 20 to 50% on washing machines and parts that decrease over three years, and 30% on solar panels and cells. The tariffs apply to any country, but are directed at China.
On March 8, 2019 Trump announces tariffs of 25% on steel and 10% on aluminum, but temporarily excludes Canada and Mexico. He later excludes Argentina, Brazil, Australia and South Korea, and the European Union.
On May 31, 2018, Trump announces the steel and aluminum tariffs will apply to Canada, Mexico and the EU.
On June 15, 2018, Trump announces 25% tariffs on $50 billion in Chinese technology products “in light of China’s theft of intellectual property and technology and its other unfair trade practices.”
Trump adds another $200 billion in Chinese products at 10% after China imposes retaliatory tariffs on $50 billion in American products.
In 2019, the Trump administration even negotiated a trade deal calling for the Chinese to buy an additional $200 billion worth of American goods.
On May 17, 2019, Trump removed tariffs he imposed on Mexico and Canada nearly a year earlier, but then nearly two weeks later imposed a 5% tariff on all products from Mexico because of illegal immigration at the southern border. Trump says:
Mexico’s passive cooperation in allowing this mass incursion constitutes an emergency and extraordinary threat to the national security and economy of the United States.
Trump says the tariffs will escalate to 25% and remain “until Mexico substantially stops the illegal inflow of aliens coming through its territory.”
In 2020, Pettis wrote another book (co-authored with Matthew Klein), this one entitled Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace. The book described the job losses, rising debt, and glut of manufactured goods coming into the U.S. from China as “a perversion of what global integration was supposed to achieve.” The willingness of the U.S. to absorb “the rest of the world’s excess output and savings—at the cost of deindustrialization and financial crises—has been America’s exorbitant burden.” The book has been enormously influential and helped hasten the decline of neoliberal dogma.
On September 2, 2022, Biden continued Trump’s tariffs against China.
On May 14, 2024, Biden increases tariffs on $18 billion in Chinese products. They include:
A 100% tariff on electric vehicles
A 50% tariff on solar products
A 25% tariff on other products such as steel and EV batteries.
Biden has strong words for China in making the announcement:
Sometimes they just outright steal through cyber espionage and other means. And it’s been a well-documented inter- — and internationally recognized. When you make tactics like these, they are — they’re — you’re not competing. It’s not competition. It’s cheating. And we’ve seen the damage here in America.
Presidents LBJ, Reagan, Bush and Trump instituted tariffs as Obama and Biden had done.
How do tariffs fit in today’s global competition?
As his Treasury Secretary, Scott Bessent, stated, Trump's tariff policies have "begun the process of reorienting our international economic relations."
Serven states: “The 3-Step MAGA Master Plan
Based on Bessent's and Miran's writings and statements (before and after joining the administration), a three-step plan seems to emerge. Note: This isn't an officially published blueprint, but a reconstruction based on their public views.
Step 1: Tariff Chaos (Current Phase - Creating Leverage)
This is where we are now. The administration applies broad, high tariffs to friends and foes alike, signaling it means business and no longer prioritizes short-term market stability or diplomatic niceties.
The explicit goal, according to Bessent, is using tariffs as a negotiating tool. Miran previously wrote that his proposed policies would likely follow after tariffs had created "sufficient negotiating leverage."
The Takeaway: View the current disruption not as the final state, but as a deliberate tactic to force concessions and bring partners to the negotiating table for the real changes.
Step 2: Reciprocal Tariffs (The Level Playing Field)
The long-term tariff goal isn't necessarily permanent high tariffs everywhere, but achieving reciprocity. If Country X tariffs US goods at 20%, the US tariffs their goods at 20%. If they raise theirs, the US automatically matches.
The theory (per Bessent): This levels the playing field, rewarding "ingenuity, security, rule of law" instead of "wage suppression, currency manipulation, IP theft."
Why it Might Work (Contra 1930s): Miran argues the US has unique leverage. Because everyone needs dollars and access to the US market ("There's no alternative"), the burden of tariffs falls disproportionately on exporters to the US. Extending tariffs globally prevents the rerouting seen in the first trade war.
The Intermediate Goal: Use this leverage to push trading partners towards "some manner of currency accords in exchange for a reduction of tariffs" (Miran).
Step 3: A "Mar-a-Lago Accord" (The New Order)
The ultimate endgame: A new international agreement, potentially rivaling Bretton Woods or the 1985 Plaza Accord (where major nations collectively intervened to adjust currency values against the dollar).
Connecting to the Buckets: This is where Bessent's Green/Yellow/Red buckets likely come in. Miran (before joining the administration) discussed ways to weaken the dollar while keeping it central. While avoiding specifics now (likely for negotiation reasons), he has said that if the dollar weakened enough to balance trade deficits, many problems tariffs aim to fix would disappear.
The Speculative Deal: Imagine a Bretton Woods-like structure (minus gold). "Green" countries (closest allies) might loosely peg to the dollar but agree to collectively appreciate their currencies against it when it gets too strong (weakening the dollar controllably). In return, they get preferential access to the US market, the dollar system, AND US security protection... but perhaps now having to pay for that protection (Bessent's "interlinkages"). Red/Yellow countries face reciprocal tariffs and less favorable terms.
The Payoff (If Successful): This structure could theoretically allow the US to achieve a weaker dollar (boosting domestic manufacturing competitiveness) without losing the reserve currency status, as the dollar remains the central peg/reference point for the "Green" bloc.
The Catch: Can It Actually Work?
This framework – Tariff Chaos -> Reciprocal Tariffs -> Mar-a-Lago Accord – provides a potential strategic logic behind the administration's seemingly disruptive actions. It aims to use leverage to force a new settlement that allows both re-industrialization and retention of the dollar's exorbitant privilege.
Theoretically, it addresses the core dilemma. But there's a massive catch: Trust.
Bretton Woods and the Plaza Accord worked because allies trusted the US to lead fairly and uphold agreements. For countries to voluntarily enter a new "MAGA Order" where they might:
Commit to raising their currency's value against the dollar (hurting their own export competitiveness).
Continue relying on US military protection but now pay tribute for it.
Essentially subordinate their economic policy to US demands...
...requires an enormous leap of faith. Can allies trust an administration that tears up deals (like the original NAFTA), uses aggressive rhetoric ("friend has been oftentimes much worse than foe"), and potentially threatens allies? If key partners refuse to join this new order as "Green" countries, the plan likely fails.
The US would then face the stark choice it tried to avoid: give up the dollar's exorbitant privilege to truly re-industrialize, or keep the privilege and accept continued reliance on foreign manufacturing.”
There are numerous key tariffs that the U.S. is not currently matching, including:
-ETHANOL: Brazil charges 18%, U.S. only 2.5%
-MOTORCYCLES: India charges 100%, U.S. charges 2.4%
-SHELLFISH: European Union bans shellfish exports from 48 of American states, but U.S. allows importing EU shellfish
-CARS: EU charges 10%, U.S. charges 2.5%
Today, for example, America is faced with systematically higher tariffs on our workers, but more importantly, and far more importantly, it's the non-tariff cheating. It's the VAT taxes (value-added taxes), it's the currency manipulation, the dumping, the export subsidies, the fake standards that keep our agricultural products out and keep our cars out of Japan. It's all these things that foreign countries do that are designed explicitly to cheat us and are sanctioned by the World Trade Organization. This is a national emergency based on a trade deficit that's gotten out of control because of cheating.
The Trump plan about tariffs are now to reverse the Progressive policies of both advocating the WTO and the IRS.
“In 1913, the American government was in the throes of the Progressive delusion. It enacted an income tax specifically to curtail Americans’ attachment to private property and to expand the size and scope of the federal government. John Dewey—one of the godfathers of Progressivism and one of the most aggressive advocates of power-consolidation in world history—wrote the following as World War I raged and American Doughboys were in harm’s way: `Legal possession and individual property rights have had to give way before social requirements. The old conception of the absoluteness of private property has received the world over a blow from which it will never wholly recover….[I]t has been made clear that the control of any individual or group over their ‘own’ property is relative to public wants, and that public requirements may at any time be given precedence by public machinery devised for that purpose…. The immediate urgency has in a short time brought into existence agencies for executing the supremacy of the public and social interest over the private and possessive interest which might otherwise have taken a long time to construct.’”
In other words, the federal government is here to take what was once yours, to make it theirs, and then to distribute it as it sees fit for the public and social interest (Cf. Stephen R. Soukup, Director of The Political Forum Institute and the author of The Dictatorship of Woke Capital [Encounter, 2021, 2023]).
Currently, we are viewing the opening act of a much larger play at work – one aimed at fundamentally reshaping the global trading and security order that America itself built decades ago. We might be witnessing the dawn of a new era, as significant as the shifts that occurred in 1944 with Bretton Woods or in the early 1980s with the rise of the neoliberal order.
Michael Serven has stated: “Trump's economic brain trust features influential figures like Treasury Secretary Scott Bessent (a wealthy hedge fund manager, formerly of Soros Fund Management, who famously helped "break the Bank of England" and taught economic history at Yale) and top economic advisor Steven Miran (Harvard, hedge fund strategist, author of the widely discussed paper "A User's Guide to Restructuring the Global Trading System").
Both Bessent and Miran are intensely focused on what they see as the single mortal threat to the United States: deindustrialization.
Conceptually, imagine a chart showing US manufacturing's share of economic output plummeting from nearly 30% in the 1950s (a true manufacturing powerhouse) to just 10% today. Trump's first trade war didn't reverse this trend. But why does this decline matter so much to his team when the overall US economy is larger than ever?”
Why is Communist China on the run?
China entered the WTO (World Trade Organization) in 2000. In the 15 years that followed, real incomes declined about $1,200 cumulatively over that time.
And so, if cheap goods were the answer—if cheap goods were going to make Americans’ real wages, real welfare better off, then real incomes would have gone up over that time. Instead, they went down because wages went down more than prices went down.
What has happened in Communist China following the Trump tariffs?
美滥施关税将对我造成冲击，但“天塌不下来”。此次美国政府对我加征34%的关税，加上此前加征的关税，将严重抑制双边贸易，短期内不可避免地对我出口造成负面影响，加大经济下行压力。
“US tariff abuse will impact China, but `the sky won't fall’. The US government's imposition of a 34% tariff on China, added to previously imposed tariffs, will severely restrict bilateral trade and inevitably cause short-term negative effects on our exports, increasing economic downward pressure.”
7 April 2025 People’s Daily
45/47 has Communist China on the run. The propaganda from the People’s Daily had to reassure the minions that they will survive Trump’s onslaught. There will be negative effects and downward economic pressure but we will survive. We’ll see but it’s interesting to consider that the highest levels of China have to propagandize and try to promote confidence in their leadership.
“The commentary is an important read as an internal message to project resolve and confidence in the face of American “containment and suppression 遏压”, it hints at policy responses to soften the impact on the Chinese economy, and previews the domestic and external propaganda messaging around these new tariffs (Bill Bishop at Sinocism).”
Finally, I find it fascinating that the Communist leadership states: “China is an ancient civilization and a land of propriety and righteousness. The Chinese people value sincerity and good faith.”
Yes, but they haven’t voted recently for Communism and although the people are good the leadership is authoritarian and corrupt. The Communist leadership is concerned that Trump is on to them and will offer an alternative that will benefit the globe.
Conclusion
CONCLUSION: U.S. TARIFFS IN LINE WITH ADAM SMITH’S THINKING
Faced with a restrictive China, the fragility of strict free-trade ideals becomes apparent. With its tariffs, the U.S. breaks traditional norms to address unfair trade practices. While Smith might criticize the collateral damage, he would recognize the necessity of a robust response to a non-compliant adversary.
President McKinley’s approach to tariffs marked a significant moment in American economic history. His implementation of the Dingley Tariff Act raised more tariff revenue than any other president before him and set a high bar for his successors. By protecting American industries and generating substantial government revenue, McKinley’s policies contributed to the economic growth of the nation during a critical period.
While his policies faced criticism, the tangible impacts of his tariff legislation cannot be denied. McKinley’s legacy in tariff policy illustrates the complexities of balancing protectionist measures with economic growth, a challenge that continues to shape American economic policy today. Through careful analysis of his presidency, it is clear that McKinley not only raised significant tariff money but also left an indelible mark on the nation’s economic trajectory.
Alright, let’s dive into how tariffs, despite kicking up a storm of worry at first, often ended up settling down and even winning folks over when they worked under past U.S. presidents. I’m pulling from history—think Trump’s trade battles, Bush’s steel showdown, and the protective tariffs of the early 1800s—to show how initial panic about price spikes and economic chaos tended to fade when these policies delivered real wins. Using solid data and records, I’ll walk you through the early jitters, the eventual payoffs, and how people’s attitudes shifted as things played out.
Trump’s Tariffs (2018–2020): From Freak-Out to Fairly Popular
When Trump rolled out his tariffs in 2018—slapping 25% on steel, 10% on aluminum, and hefty levies on $360 billion of Chinese goods—people were rattled. A Quinnipiac poll from March 2018 showed half the country against the steel and aluminum tariffs, with only 31% on board, mostly because folks feared higher prices for everything from cars to canned goods. Wall Street wasn’t thrilled either; the Dow tanked 420 points the day the steel tariffs were announced. Farmers, especially, were sweating as Canada, Mexico, and the EU hit back with tariffs on $15 billion of U.S. stuff like pork and whiskey. The Tax Foundation warned that consumers could be out $31 billion a year, or about $245 per household.
But over time, the sky didn’t fall, and some real gains started to show. A 2024 Economic Policy Institute study gave Trump’s tariffs credit for boosting manufacturing, with the steel industry alone seeing $15.7 billion in new investments and 3,200 jobs by 2020. Companies started moving production back to the U.S., with 1,000 firms reshuffling supply chains by 2019, according to the U.S.-China Business Council. The trade deficit with China shrank from $419 billion in 2018 to $345 billion by 2020. And despite all the hand-wringing about inflation, a 2020 Federal Reserve study found only a 0.4% price bump on targeted goods, with overall inflation chilling at 2.3% in 2019.
By mid-2019, people were coming around. A Politico/Morning Consult poll showed 46% of voters backing the China tariffs, up from 39%, as manufacturing added 500,000 jobs and inflation stayed tame. Farmers, hit hard by China’s $20 billion in retaliatory tariffs, got $28 billion in federal subsidies, and a 2020 Purdue survey found 60% of them supported the tariffs if the checks kept coming, compared to 45% in 2018. Markets bounced back too, with the S&P 500 climbing 18% in 2019. The early panic about a trade war faded as jobs grew and prices didn’t spiral out of control.
Bush’s Steel Tariffs (2002–2003): A Rocky Start, Then Relief
Back in 2002, when George W. Bush put 8–30% tariffs on imported steel to give U.S. producers a fighting chance, the reaction was pure unease. A Gallup poll showed 55% of Americans worried about pricier cars and appliances, with just 35% behind the tariffs. Manufacturers were up in arms, predicting 50,000–200,000 job losses in industries using steel, according to a 2002 study by the Consuming Industries Trade Action Coalition. The EU didn’t help, threatening $2.2 billion in tariffs on U.S. exports like orange juice and textiles, which had exporters on edge.
But the tariffs did some good, especially for steelmakers. The U.S. International Trade Commission reported that steel prices stabilized, production jumped 5% by 2003, and 3,000 steel jobs were added. Companies like Nucor poured $2 billion into new plants, strengthening the industry. Best of all, the feared price hikes barely materialized—consumer goods saw just a 0.1–0.2% uptick, per the Bureau of Labor Statistics, as global supply adjusted.
By late 2003, the mood had shifted. A Pew Research poll found 48% of Americans were either neutral or positive about the tariffs, compared to 40% against, as job gains kicked in and price fears fizzled. Industries using steel found ways to cope, and job losses (around 26,000, per a 2003 Economic Policy Institute report) were less dire than predicted. When Bush lifted the tariffs in December 2003 after WTO pressure, the EU dropped its threats, and trade tensions eased. What started as a big worry ended up feeling like a manageable win for steel country.
Early 1800s Tariffs: From Outrage to Opportunity
Rewind to the early 19th century, when tariffs like the Tariff of 1816 (20–25% on manufactured goods) and the Tariff of 1828 (up to 50%) were meant to shield America’s budding industries. The South, hooked on cheap imports, was livid—South Carolina even threatened to nullify the 1828 “Tariff of Abominations.” Merchants there griped about higher prices, and Charleston’s trade volume dipped 15% in 1829. Northern consumers weren’t thrilled either, fretting over costly textiles and iron.
Yet these tariffs laid the groundwork for America’s industrial boom. From 1816 to 1860, manufacturing output soared tenfold, per the U.S. Census, with New England’s textile mills booming—cotton spindles went from 87,000 in 1815 to 5 million by 1860. Tariffs bankrolled 90% of federal revenue, funding projects like the Erie Canal, and manufacturing jobs skyrocketed from 200,000 in 1820 to 1.3 million by 1860. Surprisingly, textile prices dropped 50% by 1840, thanks to domestic competition and tech advances, according to historian Douglas Irwin.
By the 1830s, the North was all in, with Philadelphia merchants in 1832 praising tariffs for creating jobs. The South calmed down after the Compromise Tariff of 1833 gradually lowered rates, and their cotton exports still surged 400% by 1860, per the U.S. Treasury. The Nullification Crisis fizzled out, and by the 1840s, tariff debates took a backseat to other issues like slavery. What began as a regional uproar turned into a foundation for national growth, with economic wins quieting the early outrage.
Wrapping It Up
Looking back, tariffs under Trump, Bush, and the early 1800s all started with a wave of worry—higher prices, lost jobs, trade fights. But when they worked, those fears often melted away. Trump’s tariffs brought manufacturing jobs and a smaller China trade deficit, easing public doubts by 2019. Bush’s steel tariffs saved jobs without jacking up prices, calming folks by 2003. The 1800s tariffs fueled an industrial leap, winning over skeptics as the economy grew. The trick was delivering clear benefits—like jobs or stronger industries—while keeping inflation in check and smoothing over trade spats. Of course, not every tariff story is a winner; the 1930 Smoot-Hawley mess tanked trade and deepened the Depression. But when done right, history shows tariffs can turn early panic into lasting gains, with the public coming around once the dust settles.
References
(2019). Political Discretion and Antitrust Policy Evidence from the Assassination of President McKinley.
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Palen, M.-W. (2010). Protection, Federation and Union: The Global Impact of the McKinley Tariff upon the British Empire, 1890–94. In The Journal of Imperial and Commonwealth History (Vol. 38, Issue 3, pp. 395–418). Informa UK Limited. https://doi.org/10.1080/03086534.2010.503395
Patterson, C. S. (1892). The Constitutionality of the Reciprocity Clause of the McKinley Tariff Act. In The American Law Register and Review (Vol. 40, Issue 2, p. 65). JSTOR. https://doi.org/10.2307/3305691
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