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Tariffs: A Brief History and the Debate of Whether They are Good or Bad

Tariffs… Tariffs… Tariffs… I am pretty sure everyone is tired of hearing about tariffs, but it is a subject that is too important to pass up. Are tariffs good or bad? Well depending on who you speak to about tariffs, the debate could go either way.

Tariffs: what’s centuries-old is new again.

In fact, people have been debating the merits of imposing tariffs for quite literally centuries. Britain and France have imposed tariffs on each other as early as the 17th century to only be exacerbated throughout Europe’s industrial revolution. Among other reasons, this manner of trade between the two countries had grown out of the many wars they fought against each other in history. You could argue this was good for both countries because it pushed each country to independently develop their own infrastructure. This would inevitably stimulate their economic growth simultaneously – so much so that they became even more undoubtedly major world powers.

You could also say that it had a major impact on wine development. The port industry in Portugal definitely benefitted from, at first, no trade between the two powers, and then they kept benefiting when heavy tariffs resumed between Britain and France. That benefit even goes for fine wine produced by France as well; cheaper wines were very heavily taxed to maintain a slower flow of the product in order to boost the production and sale of beer in Britain. While this slowed the flow of cheap wine into Britain, it also saw the increase in the production of finer wines from France. Most of the tariffs between these countries were in place up until World War I, and some would say that protectionist policies across most of Europe such as the policies between Britain and France were at least partially to blame for the outbreak of war. 

American history is littered with stories of tariffs, both imposing and being imposed upon. Even the American colonies didn’t escape the trade wars that ensued between England and France. Before the French and Indian War, the colonists experienced little to no tariffs imposed upon them by England. They were seen as subjects of the crown and their success benefitted England in more ways than one. However, after the French and Indian War, England had to pay its debts. The best way to do that was to tax the colonists and impose tariffs on foreign imports. Of course, like most people’s reaction to tariffs, the colonists didn’t like that idea. Even if those taxes and tariffs actually have very little effect towards an economy, the sting of it supersedes any logic.

This reaction to tariffs is no different from we have been seeing or will be seeing moving forward.

For instance, the Boston Tea Party was in protest against tariffs on foreign tea. The East Indian Company (a British-owned company) was going bankrupt, and England wanted to save the company by incentivizing the colonists to buy tea from the East Indian Company. They did it by making all other teas much too expensive for American consumers, while actually dropping the price of tea from the East Indian Company. Essentially, they were actually selling their tea even cheaper, but what is logical doesn’t always persuade people to see the underling benefits.

Most tariffs, or the idea of tariffs, are born out of protectionism. Most people believe that they protect us domestically from foreign competition. Although in some regards that is true, history doesn’t always agree. Up until World War I, most economies were more geared towards this protectionist philosophy. Even after the war, this mostly held true. Europe was in shambles due the heavy cost of war and a need to punish Germany for that cost. Germany was made to pay reparation, and in order to do that they borrowed heavily from the U.S. Furthermore, other Europeans were trying to also pay their debt to the U.S. from the war which led to heavy dependance on American capital. This was great for the U.S. but when the American system crashed, the whole system crashed along with it. At first, we tried to do nothing but then it was decided to impose the most extensive system of tariffs the U.S. has ever imposed on their trading partners. This in turn helped extend the Great Depression from a temporary problem into a decade-long burden up until the Second World War.

After World War II, most countries adopted more of a free trade philosophy (I should say this philosophy was more adopted in the western world) aside from, most notably, Australia. Although Australia isn’t exactly located in the west, it is intrenched in western philosophical ideas. Maybe high tariffs helped Australia in some regards to grow economically but in most instances, this wasn’t the case. For example, when colored TVs first hit the market, the prices for Australians were virtually unaffordable. Even when they tried to produce their own colored TVs, it proved to be a futile endeavor. They essentially needed outside goods and technology to truly thrive as a nation. They have since lowered their tariffs and have reaped the benefitted of adopting more of a free trade philosophy.

These are just some of the many examples of tariffs in history.

And as I said before, tariffs can be good or bad depending on who you are talking to, and frankly what they are used for. This only scratches the surface, but it can be insightful to look to the past. The information is out there, and we have to ask ourselves how we can look to the past to shape our future. Of course things change, but some fundamentals stay the same.

Our ideas about tariffs aren’t just something new that we came up in our current climate. They have been around a long time for many different reasons and agendas. I know I started with the 17th century, but you can even go back farther to see what kind of impact countries can have on each other; whether it be some form or tariff or some kind of free trade. So, I guess the question is, how can we shape our future from learning from the past? 

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