Madison Used Tariffs to Force the British to Change Their Trade Policies

The French Revolutionary Wars (1792 – 1802) and the Napoleonic War (1803 – 1815) were godsends for the American economy. At the end of the American Revolution, the economy of the new United States was in tatters. Today, some economists say it was a deep recession, others a depression.

Complicating matters was the country didn’t have the governmental mechanisms/procedures/policies we have today to coax the economy forward. The Articles of Confederation didn’t give the Continental Congress the power to act, and then, once the new Constitution was ratified, there was a steep learning curve as the three branches of government figured out how to govern.

Before the Revolutionary War, England was our largest trading partner. During the eight years of the War for Independence, American businessmen were forced to find markets for their goods elsewhere. It was tough sledding.

The economic difficulties forced American businessmen to do what they have always done. Adapt, improvise and overcome. The U.S. economy slowly began to shift from a purely agrarian one to one in which manufacturing was beginning to grow, particularly in the northern states.

Economically, socially and politically, France was sliding toward chaos that became the French Revolution. Neither could Spain. The Dutch economy wasn’t large enough.

Once Europe erupted in war, the U.S. had what the war-torn countries desperately needed – food and raw materials needed to sustain the belligerent’s war efforts. The U.S. economy grew ~300% between 1792 and 1800.

Slowly but steadily during the the 23 years Europe was consumed by war, U.S. manufacturing grew. By 1815, 20% of the workforce in the northern states – primarily Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont – was employed by manufacturing. In the southern states – Georgia, North and South Carolina, Tennessee and Virginia – only eight percent of the workers were in factories.

Nonetheless, the Treaty of Ghent which ended the War of 1812 left many leaders in the U.S. government uneasy. They still didn’t trust the British merchants who were flooding the growing U.S. economy with manufactured goods at cut-rate prices. U.S. manufacturers couldn’t compete. In his constitutionally required annual address on December 5th, 1815, James Madison suggested Congress issue tariffs to protect emerging U.S. manufacturing firms and their technology.

Even though the tariffs would raise costs to businessmen in the southern states, they agreed to support them because they were confident they could absorb the added costs for what they bought from British suppliers. A three-year time limit on the tariffs made the bill palatable to all sides.

So, what was taxed? Fabrics from India were hit with a $.25/yard tariff, and items such as manufactured iron goods, leather, paper, furniture, and hats were taxed at 30%.

Known as the Dallas Tariffs after Madison’s Secretary of the Treasury, Alexander Dallas, they had the desired effect. The British changed their trade policies when they realized that their economic growth and prosperity was tied to that of the U.S.

The tariffs also encouraged the British negotiate the Rush-Bagot Treaty of 1817 (See 11/12/23 Blog Post – https://marcliebman.com/demilitarizing-the-u-s-canadian-border/ ) and the Treaty of 1818 which established the U.S./Canadian border on the 49th, parallel from the Western end of the Great Lakes to the Pacific.

1813 Charles William cartoon of James Madison punching John Bull

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