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The Tariff of 1816 in America was a significant step in what became a history of passing taxes on imports to protect American manufacturing.

Read this lesson to learn more about the historical background and significance of the Tariff of 1816.

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Introduction to the Tariff of 1816

Taxes. We don’t like paying them, but there’s no escaping them! They seem to be a necessary evil in any economy. Taxes fund the government, and they are sometimes used to steer consumers’ decisions towards one product over another. That was the case with a special kind of tax, the first of its kind, in fact, from the early years of our Republic, the Tariff of 1816.

In 1816, Congress wanted to raise more funds and encourage Americans to buy more American-made products. To accomplish this, they adopted the Tariff of 1816, which taxed imported items, like cotton and wool. Though there were taxes and tariffs before 1816, the Tariff of 1816 was the first tariff designed specifically to protect American industry. For example, take a look at the image below. This is an engraving of a New England factory from the early 1800s, the kind of factory the tariff was meant to protect:

Engraving of a New England factory from the early 1800s, the kind of factory the Tariff of 1816 was meant to protect
Engraving of New England factory

Historical Background: The Need for the Tariff of 1816

By 1816, the United States of America was growing but still vulnerable.

Agriculture dominated the South, and manufacturing was expanding in the North. Still, the economy could not produce all of the goods its citizens needed, and Americans had to import several products from other nations. This made the young nation reliant on other nations, like Great Britain. This was hardly a position the U.S. wanted to be in, considering it had recently fought not just one, but two wars against Great Britain.

That’s right, America had just finished its second war against Great Britain, the War of 1812. Great Britain had been restricting America’s trading rights, and they were even capturing American soldiers and forcing them to serve in the British Navy. The War of 1812 was fought in order to end these practices. The U.S. held its own during the war, but there was no clear victor when it ended in 1815. There was, however, fear that a new war between the United States and Great Britain would soon begin.

In addition, there was a growing realization that America needed to become economically self-sufficient so that it did not have to rely on European goods to sustain the its economy.

Definition of the Tariff of 1816

The War of 1812 created the perfect historical opportunity to pass the Tariff of 1816 for a few reasons. First of all, the war was expensive, and the nation was in desperate need of revenue. In addition, the war convinced people American industry needed a little help. The textile industry in New England was growing, but Great Britain was flooding the U.S.

economy with cheaper goods, making it hard for American industries to expand. Finally, the War of 1812 made Americans more patriotic and more suspicious of Great Britain. Americans truly wanted to buy American-made products over foreign, specifically British, goods.The Tariff of 1816 promised to solve these problems. The tariff’s main feature was a 25% tax on foreign-made cotton and wool products; the tariff also charged taxes on other imports, like iron and leather. This tax would thus raise money that could help pay war debts and that could be lent to manufacturers. In addition, this tax made imports more expensive, thus encouraging consumers to purchase more American-made goods, which were obviously not subject to the tariff.

Before the tariff, American products were expensive since American industries were not as big or well-established as those in Europe. The tariff, then, would hopefully make American products more appealing and help American factories expand. The end result would hopefully make the country’s economy more vibrant and independent.

Support and Opposition

The Tariff of 1816 was the first one intended specifically to protect American industry. It was only meant to be a temporary policy because Congress did not want to get in the habit of using taxes to manipulate the economy. In fact, there were some, called free-traders, who opposed the Tariff of 1816. They did not want the government interfering with the economy or trade at all because they were worried the government was over-stepping its bounds by doing so.The tariff had a lot of support, however, especially from those called protectionists.

Protectionists in general wanted the government to use policy, like tariffs, to protect American industry. The tariff also enjoyed support from some prominent figures in the South, a region that would later staunchly oppose such protectionist tariffs. Most people saw the tariff as necessary only as a temporary means of spurring economic development and shielding fledgling American industries from European, especially British, competition. In the end, the protectionists won the day, and the Tariff of 1816 passed.

Lesson Summary

The Tariff of 1816, the first protectionist tariff in the United States, did indeed help some manufacturers expand. The War of 1812, America’s second war with Great Britain, made people realize America needed to build up its own manufacturing instead of relying on Europe for industrialized goods. They did this by enacting a 25% tax on foreign-made goods, mostly textiles, like cotton, wool and leather.

Protectionists believed the tariff was the best way to encourage such economic development, while free-traders opposed the tariff. This tariff is significant in history because it was more widely supported and successful than many future tariffs. Even though the Tariff of 1816 was not meant to be permanent, it began a long tradition of using taxes and public policy to influence the economy, a tradition that we still follow in our modern economy.

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