(C) Daily Kos
This story was originally published by Daily Kos and is unaltered.
. . . . . . . . . .



A Historian's Perspective: Trump Needs a Lesson on Tariffs from Alexander Hamilton [1]

['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']

Date: 2025-02-16

Donald Trump’s obsession with tariffs dates back to his first presidency, and gained significant momentum within his circle during the earlier stages of the 2024 presidential campaign. Trump views tariffs as a hammer that he can wield against unruly countries and trading partners to extract fealty and bend them to his will both economically and politically. A lot has been made over the past ten months, and especially since the inauguration on January 20, about how naive and wrong-headed is Trump’s oft-stated vision of tariffs as some sort of economic panacea that can solve all economic ills, be they inflation, supposed trade deficits, stagnant wages, growth in domestic manufacturing, or revenue generation to pare down the national debt. Trump believes that simply by decreeing a tariff of between 25- 50% on our regular trade partners, he will immediately return the United States to some lost state of economic glory and imperialism. I don’t need to cite the many, many sources who have dismantled these arguments, although here is a place to start if you are interested.

Frankly, the contention that tariffs will reduce inflation defies even the simplest common sense for anyone that has the remotest understanding of what a tariff actually is (which begs the question….). However, that does not mean that there are not legitimate benefits to tariffs. The United States has a long history with tariffs dating back to the ratification of the Constitution. Indeed, a simple history lesson on our first national dalliance with tariffs may show us, and educate Trump, as to how they might be used to our benefit under the right circumstances– and how they can lead to disastrous consequences if not.

Alexander Hamilton is widely celebrated as the United States’ first Treasury Secretary who put the country on a sound financial footing and set it on the path to one day becoming a global superpower. When the First Congress reached its first quorum in March of 1789, the finances of the United States were catastrophic. The combined debt of the states following the Revolution was somewhere in the neighborhood of $77 million ($2.7 billion in today’s dollars) while the annual national revenues were just north of $4 million. American credit in Europe was virtually nonexistent– no one would loan the United States money on anywhere close to fair terms, and no one wanted to invest in American bonds or debt. The dollar, or “Continental,” was mostly useless.

Between 1789 and 1792, Hamilton convinced Congress and the Washington Administration to enact a series of tariffs as part of his broader economic plan. Hamilton had several key aims for these tariffs. Yes, one goal was to generate revenue to fund the government and establish national credit through debt payment. However, Hamilton also sought to spur American manufacturing in specific industries to promote domestic economic growth. This latter goal is worth looking at more closely. For Hamilton, the tariffs were one part of a cohesive economic program for the United States. While the tariffs would make the importation of foreign manufactured goods more expensive, the United States would also promote the domestic manufacture of those same goods through subsidies and other benefits (such as infrastructure building) funded by the tariffs. Furthermore, Hamilton wanted to continue to foster and promote foreign trade, so his tariffs were moderate, mostly between 2-5%.

The rest of Hamilton’s economic program included measures to establish more sound faith and credit in both US currency and the national debt, as well as a more regulated currency, money supply, and monetary policy. All of these facets- national credit, national debt, foreign commerce, domestic manufacturing, regulated currency, infrastructure spending, and yes tariffs- were intimately connected and woven together into a dynamic system where each element supported and aided the others. And it worked. By 1800, the United States had the highest credit rating in Europe, and foreign investors had invested tens of millions of dollars in US bonds that were being used to fund the American Navy to support trade, build roads and canals to foster internal commerce, and subsidize American manufacturing.

Now, let’s contrast Hamilton’s carefully crafted and interconnected economic system with Trump’s tariffs. I am no economist, but to a lay observer, Trump’s tariffs look to be chaotic at best. One day, they are in place, the next day they are paused. Wildly varying numbers are thrown out every time there is a press conference. Trump has yet to present anything resembling a budget proposal, which was officially due February 3, so any infrastructure spending or programs to promote domestic manufacturing are entirely unknown, if they will exist at all.

The actual Trump tariffs themselves are anything but “moderate.” Days ago, Trump extended tariffs on foreign steel and aluminum imports to 25%. He levied 25% tariffs on all imports from Mexico and Canada, although subsequently “paused” them, and 10% tariffs on all imports from China. Tariffs this high are generally seen as protectionist, with a primary aim of spurring domestic manufacturing in the affected sectors. However, this does not necessarily seem to be the case with Trump’s tariffs. Electric vehicle imports from China appear to be one item highly affected by the Trump tariffs, yet Trump has talked about ending various subsidies for American electric vehicle manufacturing and purchase.

Similarly, imported electronics and semiconductors from China are rumored to be significantly targeted by the Trump tariffs, while at the same time the Trump Administration is signaling a review and delay of funding of the CHIPS Act, a Biden law widely celebrated as a spur to American electronic and semiconductor manufacturing. Trump’s tariffs are destined to drive up prices of all goods and services remotely touched by his tariffs, with no corollary benefit to those same goods and services produced domestically that might offset higher costs with more American jobs or potentially cheaper American-made goods. This all leaves us naturally asking what is Trump’s endgame with his tariffs? And how are they really going to affect Americans?

As with so much of what Trump does, there doesn’t appear to be any system, any coherent long-term plan in place. We have long known that Trump is ruled only by his id, and his approach to tariffs appears to be no different. We’ve seen this act before: Trump weaponizes a power of the presidency he barely understands to extract something from another country or world leader, without any thought as to ancillary effects… or collateral damage.

As we have seen, Alexander Hamilton used tariffs as part of a multifaceted approach to establish sound footing for the American economy and set it on the path to become a dynamic global force that ultimately built the 20th century. Tariffs can be a powerful tool to support American manufacturing and grow American jobs and industry if used correctly. Or they can be a blunt object used as a weapon for retribution and revenge, one that when swung wildly without purpose stands as much a chance to hurt Americans as it does foreign countries. This is not the first time someone has said this, and it certainly won’t be the last, but my God, I wish Trump would pick up a history book, or any book for that matter, and learn anything. Alexander Hamilton is rolling over in his grave.

-Peter Porcupine

[END]
---
[1] Url: https://dailykos.com/stories/2025/2/16/2304078/-A-Historian-s-Perspective-Trump-Needs-a-Lesson-on-Tariffs-from-Alexander-Hamilton?pm_campaign=front_page&pm_source=more_community&pm_medium=web

Published and (C) by Daily Kos
Content appears here under this condition or license: Site content may be used for any purpose without permission unless otherwise specified.

via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/dailykos/