close
close

tub-blois

Breaking: Beyond Headlines!

The tariff story that Donald Trump neglects
aecifo

The tariff story that Donald Trump neglects

TThe Harris/Walz Democratic presidential slate popularized the slogan “We Ain’t Coming Back.” The “return” they are referring to is the four chaotic years of the first presidential administration of Donald J. Trump, as well as a pre-Roe v. Wade the era of unsafe abortions.

But the Democrats’ catchy rallying cry could just as easily apply to Trump’s economic policies, particularly his tax and international trade policies, which would return the United States not only to the Trump presidency, but also to the end of the 19th century, at a time when customs tariffs were regressive. and the absence of progressive income taxes fueled the massive inequalities of the First Gilded Age.

Trump recently sworn that if re-elected, he will fundamentally transform America’s tax and trade systems. As part of its “the new American industrialism” Trump proposes to erode existing progressive income and wealth transfer taxes in the United States, essentially replacing them with regressive tariffs, or import duties, on consumer goods. As part of his economic nationalism, Trump has called for a 20 percent across-the-board tariff on all imports, a 60 percent tariff on Chinese goods and a punitive tax on U.S. companies that ship jobs overseas.

Trump uses his usual historical hyperbole to drive the point home. “Tariffs are the greatest thing ever invented” he said. He even bragged about calling himself a “tariff man” and held up the protectionist tariffs of 19th-century Republican President William McKinley as a model for today.

President McKinley as a physician.
He has only one medicine for all ills: President McKinley as a physician dispensing a powerful “tariff” medicine.
Universal History Archives/Universal Images Group via Getty Images

Yet what is missing from Trump’s glorification of the past is any sense of the broader historical context and sequence of events that led to the demise of the 19th century system of regressive tariffs and the increase in progressive income taxes. Curing Americans of this historical amnesia can remind them of the hard-fought roots of our current system of progressive federal taxation – a system that not only provided the revenue needed for a modern nation-state, but also addressed broader issues of economic justice.

Learn more: Donald Trump and Kamala Harris’ position on China

Between the end of the Civil War and the start of World War I, import duties were the main source of revenue. federal government revenuerepresenting at their peak almost 60% of annual public revenue. The primary justification for high tariffs was to protect the “emerging industries» – and jobs in these industries – from foreign competition.

But by the dawn of the 20th century, America’s manufacturing industry had virtually no need for protection. American companies were quickly outpacing their global competitors by flooding the global market with American-made products. As a British journalist said note in 1901, “the most serious aspect of the American industrial invasion lies in the fact that these newcomers have taken control of almost all the new industries created during the last fifteen years.”

Such American manufacturing dominance forced many legislators and reformers to rethink the existing tax and trade system. In the late 1800s, Democratic opponents of the Republican Party’s high tariffs and economic nationalism pointed out that protectionism no longer protected infant industries, but rather promoted greater concentration of wealth and increased inequality. The protective tariff has been described as “the mother of all trusts» and the driving force behind business consolidations.

Congressman Benton McMillin (D-Tennessee), an early advocate of progressive income taxes and antitrust laws, highlighted the links between tariffs and inequality. “While the government has erected price barriers on the outside,” McMillin told lawmakers, “the monopolies have united on the inside to raise prices and plunder people through known devices under the name of trusts, pools and coalitions”.

Other observers also argued that import duties were passed on to ordinary consumers, disproportionately harming the working class – further depriving those who had less. The “essential character of our protective policy,” noted one expert, “artificially and cruelly increases the cost of clothing, bedding, housing, tools and a thousand objects of daily life.”

Many of the same American lawmakers and economic experts who supported free trade also supported direct, progressive taxes on income, inheritances, and corporate profits. Political economist from the University of Michigan Henry Carter Adamsa pioneering scholar of American public finance, argued that protective tariffs were based on outdated political and social theory. “The modern State assumes duties far beyond the primitive functions of protection,” Adams wrote in his 1898 treatise. Such a “theory of taxation has perhaps been quite useful in the conceptions of governmental activity of the beginning of the century,” he continues, but “it must be considered at present as somewhat obsolete.”

Despite growing calls for free trade and progressive taxation, the movement to replace regressive tariffs with progressive taxes has faced many obstacles. Reformers had to defeat a conservative United States Supreme Court decision which overturned the income tax of 1894. Highlighting the immense inequalities of the era, tax activists rallied support from labor unions, agrarian associations, and free trade advocates to pass a constitutional amendment overturning the High Court.

It took nearly two decades before the hard-fought battle 16th amendment was ratified in 1913, laying the legal foundation for a progressive income tax. In the same year, the United States, led by Democratic President Woodrow Wilson, adopted the first peacetime income tax.

The 1913 income tax came just in time. The start of World War I the following year significantly decreased international trade and therefore American customs revenue. The war also provided legislators with the opportunity to revolutionize the federal tax system by enacting highly progressive taxes on income, inheritance and corporate profits to finance the war effort. The war was therefore a pivotal event marking the eclipse of the 19th century system of regressive customs tariffs by the increase in progressive taxation.

Learn more: It is incorrect to say that CEOs are pro-Trump. Here’s why

Over the past century, our federal system of direct and progressive taxes has not only provided much-needed revenue to support a modern nation-state, but it has also helped address broader concerns about economic justice, identity civic and public power.

As Trump’s past and proposed policies show, this history has been all but forgotten. Of course, the Biden-Harris administration has maintained some of Trump’s earlier import tariffs, but in a more targeted manner. Trump, however, redoubled his efforts in favor of tariffs, promising to make their expansion the cornerstone of his next administration. Economic experts predicted that such policies would hamper economic growth, increase inflation, hurt the working class, balloon the deficit, and likely spark a new trade war. As a result, his policies would return us to the first golden age of wealth concentration and gross economic inequality.

Trump’s calls to replace the federal income tax with protective tariffs are not only impractical in the face of growing federal deficits; it is also a conflict with historical reality. This is all the more reason why Democrats have aptly adopted the slogan “we’re not going back.”

Ajay K. Mehrotra is professor of law and history at Northwestern University, research professor at the American Bar Foundation, and author of Creating the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877 – 1929.

Made by History takes readers beyond the headlines with articles written and edited by professional historians. Learn more about Made by History at TIME here. Opinions expressed do not necessarily reflect the views of the TIME editors.