America's been arguing over trade for more than 250 years

As the United States marks the 250th anniversary of declaring its independence from Britain, Americans continue a tradition begun even longer ago: debating trade and tariffs. In recent years, disagreements over the US role in the world economy have grown particularly intense amid rising geopolitical tensions. A brief look at history offers an opportunity to reflect on the importance of international trade to the US economy over time.

From the early 1600s, British settlers in North America relied on overseas trade for their well-being. Trade furnished the colonists with clothing and blankets, nails and firearms, cooking implements and metal goods, and other tools and materials that could not be produced locally. Without these imports, their standard of living might have suffered so much that they would not have stayed. As McCusker and Menard (1985, 71)[1] put it, "Overseas commerce did not merely make colonial life comfortable, it made it possible."

Of course, political friction between Britain and the American colonists grew after the French and Indian War of 1754–63 (known in Europe as the Seven Years' War). The British incurred large war debts that they tried to shift to the colonists. "No taxation without representation!" became one of the rallying cries of the American independence movement in the 1770s. The taxation in question was partly the taxation of foreign trade. Among the many grievances cited in the Declaration of Independence in 1776 was the complaint about Britain's "cutting off our trade with all parts of the world" and "imposing taxes on us without our consent."

Figure 1 presents one measure of the importance of merchandise trade to the US economy: the ratio of exports and imports to GDP, starting in 1790. As we can see, trade was a large part of the economy—about 10 to 20 percent of GDP—in the decade or so after the new government was established under the Constitution of 1787. However, trade was unusually volatile in the early 1800s because of the Napoleonic wars between Britain and France. US trade fell especially sharply during the War of 1812 with Britain.

After the war, trade settled down to between 5 and 10 percent of GDP. This is lower than in the 18th century because the economic weight of the country moved to the Midwest, as Americans migrated West, a region less integrated with the economies of Western Europe. The United States also began to impose higher tariffs that limited imports directly and exports indirectly. Finally, the US economy became more diversified, with a growing manufacturing sector that reduced the nation's dependence on imported manufactured goods.

The drop in trade due to the Civil War of the 1860s is also evident, but trade continued to be stable at about 5 percent of GDP through the end of the 19th century. One can see blips in US exports during World War I and World War II. And then, starting in the 1970s, exports and imports as a share of GDP begin to rise from about 5 percent to more than 10 percent. The globalization era also sees imports becoming greater than exports in 1980 as the United States begins to experience large trade deficits. Since the global financial crisis of 2008–10, trade has been falling as a share of US GDP, a process accelerated by the tariffs of the two Trump administrations.

Figure 2 shows the evolution of US tariffs over the course of history. Starting in 1790, the average tariff on imports rose steadily from about 10 percent to reach 60 percent under the Tariff of Abominations in 1828. This provoked a political crisis and almost triggered the succession of some Southern states, such as South Carolina, which threatened to "nullify" the tariff. The Compromise of 1833, brokered by Senator Henry Clay, brought tariff levels down to under 20 percent by 1860, just before the Civil War began.

The Civil War shifted political power to the Republican party from the North, which instituted high tariffs to raise revenue and to protect domestic industry. The tariff series diverge, with a high tariff on dutiable imports (largely manufactured goods) and a lower overall tariff that accounts for duty-free imports of consumer goods such as coffee and tea that are not produced domestically. The tariff series is buffeted by the inflation of World War I, the deflation of the Great Depression, and the inflation of World War II. Many duties were specific (not ad valorem), meaning that they were a specific dollar amount per imported quantity, the percentage valuation of which is inversely related to the price level.

After World War II and the establishment of the General Agreement on Tariffs and Trade (GATT), US tariff levels stabilized and trended downward due to the adoption of free trade agreements, such as the North American Free Trade Agreement (NAFTA), which entered into force in 1994. However, the Trump administration has reversed many of these policies, and tariff levels jumped significantly in 2025.

Today, Americans disagree intensely about the Trump administration's use of tariffs as a tool of US economic and foreign policy. This suggests that the nation's trade debates are sure to continue for years to come.

Note

1. McCusker, John J., and Russell R. Menard. 1985. The Economy of British America, 1607–1789. Chapel Hill: University of North Carolina Press.