Tariffs have been a central part of economic policy since the birth of modern governments—and few countries have leaned into them as heavily as the United States. But what are tariffs, how did they evolve, and why do they matter so much today?

Let’s take a look at the surprisingly dramatic history of tariffs, from George Washington to Donald Trump, and how they’ve shaped global trade.

What Exactly Are Tariffs?

Tariffs are taxes placed on imported goods. Governments often use them for two reasons:

1. To generate revenue
2. To protect domestic industries from foreign competition

In theory, higher tariffs make imported goods more expensive, giving local producers an edge. But in practice, they’ve also sparked trade wars, hurt global supply chains, and in some cases—made bad economies worse.

1789: Tariffs Help Build a Nation

Tariffs played a crucial role in the early United States. The Tariff Act of 1789, signed by George Washington, imposed a 5% duty on imported goods. With no federal income tax yet, this was the primary way to fund the government and protect fledgling American industries.

Following the War of 1812, tariffs increased again to protect domestic manufacturers, especially against cheaper British goods. By the late 1800s, high tariffs became a mainstay of U.S. economic policy.

1890: The McKinley Tariff and Rising Tensions

The Tariff Act of 1890, also known as the McKinley Tariff, raised import duties to nearly 50% on over 1,500 items. This move—championed by future president William McKinley—was meant to protect American jobs and industry.

But the impact wasn’t what was intended.

Prices on everyday goods rose, triggering public backlash. When the Panic of 1893 hit, the economic downturn was severe. Unemployment soared, and what was once called “The Great Depression” of the 1890s swept across the country.

1913: Income Tax Replaces Tariffs

A key shift occurred in 1913 with the ratification of the 16th Amendment, which allowed the federal government to collect income tax. As income tax revenue increased, the reliance on tariffs began to decline.

Still, tariffs remained high throughout the 1920s—culminating in one of the most infamous tariff policies in U.S. history.

1930: The Smoot-Hawley Tariff Act

During the early days of the Great Depression, Republican lawmakers Willis Hawley and Reed Smoot introduced a bill to raise tariffs on imported goods. Despite the warning of over 1,000 economists who signed a letter urging a veto, President Herbert Hoover signed the Smoot-Hawley Tariff Act into law in 1930.

The result? Disaster.

Over 20 countries retaliated with tariffs of their own. U.S. exports collapsed. Unemployment skyrocketed. And the global economy spiraled further into depression.

While not the sole cause of the Great Depression, most historians agree that Smoot-Hawley made it significantly worse. It remains a textbook example of how protectionist policies can backfire in an interconnected world.

Post-WWII: Global Trade Cooperation

After World War II, the U.S. took a different path. Recognizing the need for global economic cooperation, it led the formation of institutions like the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organization (WTO). Tariff rates dropped, and trade boomed.

In Canada, the post-war era also saw greater engagement in global trade and reduced reliance on tariffs, aligning with broader multilateral efforts.

2018–2025: The Tariff Revival

Fast forward to today, and tariffs are once again in the spotlight.

During his presidency, Donald Trump reintroduced aggressive tariffs, targeting China, Canada, Mexico, and the European Union. His administration imposed a 25% tariff on steel and 10% on aluminum, citing national security concerns.

In 2025, Trump has reasserted tariffs as a central part of his economic strategy. He’s often pointed to historical tariffs as the foundation of American prosperity—though many economists challenge that interpretation.

So, What’s the Takeaway?

Tariffs have been used for centuries to protect industries, raise revenue, and respond to foreign competition. But history has shown that tariffs can have major unintended consequences—hurting consumers, disrupting trade, and triggering retaliation.

As Canada braces for new tariffs in 2025, it’s worth remembering the lessons of the past. Tariffs are not just economic tools—they’re political signals, and they can reshape the economy for better or worse.