Tariffs through time: have they ever worked?

The idea is as old as time, at least since Lagash, a Mesopotamian city imposed them around 2500BCE. The port-city of Antwerp in Belgium is known for being very severe with import duties in the 15^th century. Those who refused to pay were pointed to a statue in the harbour, where a man throws two severed hands into the sea (Antwerpen purportedly comes from “Handwerpen” which means hand-throwing).  In the past two hundred years alone, more than a dozen major trade wars have taken place.

The most infamous is the Smoot-Hawley Act in 1930. In the decade that preceded it, Warren G Harding, the 29^th US President, decided to protect US industries by significantly upping all tariffs. It came as little surprise then that, a few years later, Herbert Hoover’s administration steeply hiked those tariffs in a bid to shield US industries from a vicious spiral of the Great Depression, which had originated in the US.

The move was soon followed by others, significantly accentuating the worst global economic downturn in recent recorded history. Of course, it didn’t work, as the pain had gone global. By 1932 unemployment had skyrocketed, Wall Street was in smouldering ruins and America’s shining image of towering steel behemoths was replaced with that of ragged men  hopelessly roaming the country for work. From F. Scott Fitzerald’s epic-scale soul-saturating parties, to John Steinbeck’s Dustbowl dystopia in less than five years. And from the devastation wrought upon others, especially Germany, to re-armament and a second World War. 

Hoover’s tariffs were, of course, not the only failed tariff attempt. Almost a century earlier, in 1828, John Quincy Adams, America’s 6^th President, saw fit to impose 38% tariffs on all imported goods during his last year in office. His successor, the larger-than-life Andrew “The King” Jackson, was forced to uphold them, as they protected and nurtured Northern industries. Jackson’s VP was John C. Calhoun, a Southerner.

With Britain, the world’s largest economy at the time, retaliating and stopping imports of cotton, the South was experiencing economic decline. Import levies prevented it from importing much-needed machinery to harvest crops. They turned to manual labour… which in those times consisted mostly of slaves. The North criticised the South over the practice, prompting Mr Calhoun to quit his office (the first of two VPs ever to do so) and to declare that states had a right to ignore Federal law if they deemed it unconstitutional. His “Nullification Theory” provided the theoretical platform for the secession and civil war.

History, time and again, provides the same valuable lesson as game theory: cooperation beats hostility. Repercussions from steep tariffs can be as high abroad, as they are divisive internally.

As former Chancellor Alastair Darling, who scuppered Barclays’ 11^th hour attempt to buy Lehman Brothers found out, there’s no running away from a problem once it’s gone global. And experience suggests that if these efforts caused such tensions nearly 200 years ago, they could be far worse at a time of a fully integrated and interconnected global financial system, and extremely sophisticated -but delicate- supply chains. In a world where the iPhone is produced from components and processes from over 43 countries, and a simple car engine piston crosses the US-Mexico-Canada border six times, state autarky is a distant dream, and tariffs can cost a lot.

We must remember the reasons behind them are complex and comprises of many factors:

• Slower global growth post the 2008 Global Financial Crisis.
• The explosion of government debt to cover bailouts and replace broken credit-driven growth.
• The loss of state revenue from low-taxed multinational tech and manufacturing firms.
•  The dramatic de-industrialisation of the American North which turned previously “Blue states” into “Swing-state Battlegrounds”.

Through tariffs, the United States  is seemingly offering a deceptively simple answer to a particularly complicated problem: just put America first. De-globalisation will reduce the value of the Dollar (already does), while tariffs will “punish importers” and help fund tax cuts. Meanwhile, the Republican party at least appears to “fight” for the welfare of Northern states, in a bid to politically realign them.

There are always legitimate goals behind tariffs. Protectionism actually seeks to protect business owners, or workers. But history’s lesson on this one is singular: tariffs can solve some problems, but invariably create other, often bigger ones.

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* This article was originally featured in the FT Adviser on 11 April 2025.