Financial History 143 Fall 2022 - Page 41

President Polk commented in his diary how “ the absence of a single Democratic Senator will probably enable them to effect their object .” Only with the support of Whig Senator Spencer Jaragin of Tennessee and 27 Democrats did the measure become law ; the final vote was a razor-thin 28 “ for ” to 27 “ against .”
The Walker Tariff would serve as an “ ad valorem ” tariff with irons , metals , wool , leather and glass subject to a 30 % duty and cotton goods subject to a 25 % duty . Furthermore , by some estimates , it reduced the Tariff of 1842 , effectively , by 20 %. Under an ad valorem system , imports are taxed based on their specific value and not the quantity imported . As predicted , Whig resentment for the bill expressed a large scale of economic calamities would befall the United States , most of which proved false . According to their declarations , the growth of imports associated with a lower tariff would drain gold from the country , forcing the newly created independent Treasury to withdraw government deposits from banks , thus further reducing gold reserves .
As mentioned , the ad valorem duty enacted by Walker ’ s proposal would tax a percentage of the import based on its value and not its size or quantity ; according to the Whigs , manufacturers and their employees would suffer as a result . They even forecast that the country would go into bankruptcy since lower tariffs would be insufficient to pay the costs of the Mexican-American War ( 1846 – 1848 ).
It appears that just the opposite happened . A favorable balance of trade resulted — at least in agriculture — due much to the Irish potato famine of late 1846 , which caused greater US grain exports and increased wealth for farmers . Moreover , the government did not just hold deposits from banks but spent them on war contracts . The multiplier impact of this spending increased macroeconomic growth across commerce , agriculture and industry , although overall revenue declined by 10 % from 1846 – 47 . Though it did not go bankrupt , the country increased its national debt borrowing as much as $ 49 million , long-term , from 1846-49 . This additional indebtedness went to finance the war .
Nevertheless , the overall marginal benefits of the Walker Tariff exceeded its perceived costs , leaving some Whig members to question its repeal . Congressman Meredith Gentry of Tennessee commented to fellow Whig Daniel Webster of Massachusetts how a “ combination of circumstances at home and abroad ” had made the Walker Tariff “ less destructive to our home manufactures as anticipated .”
The growth in iron production , particularly anthracite iron , in the wake of the tariff , verified how the legislation , in at least some economic quarters , benefited the economy . Anthracite iron , or “ pig iron ,” is created by combining anthracite coal and iron ore . The result is a much more efficient source of iron production compared to coal iron , which is produced from the smelting of iron ore and coal . Anthracite , by comparison , has greater durability , fewer impurities and is considered a higher quality of coal for industrial purposes .
Production of anthracite had been increasing since 1840 and furthermore , lower import duties on charcoal iron — as a result of Walker — coincided with an overall substitution of anthracite in iron manufactures . At the time , railroad iron , made possible by anthracite , also increased in production . Given these circumstances , economic historian Frank Taussig , author of The Tariff History of the United States , concluded that “ low duties permitted a large importation of foreign iron [ charcoal iron ], in addition to large domestic production ” whose abundance only served in promoting “ material prosperity .”
Taussig further estimated that cotton exports — denoted by the number of Massachusetts spindling operations at the time used to convert raw cotton into finished products — increased from 800,000 in 1845 to one million by 1860 . Also , around the same time , the value of cotton exported to Asia rose from four million during the 1844-49 period to eight million between 1851 and 1856 . Taussig observed that the “ absence of high duties had an effect on the range of the industry ;” however , production was confined to cheaper cotton products and not to the making of “ finer and ‘ fancy ’ goods .”
Wool manufacturing , which had experienced steady growth because of the high duties imposed by the Tariff of 1842 , found itself switching from the production of finer linens to cheaper alternatives , like blankets and flannels , after 1846 . These items tended to serve domestic markets primarily , but technological developments — like the Crompton Loom at Lowell , Massachusetts — eventually allowed for increased production . The quality of cashmere , for example , improved with such enhancements in production .
A significant trading partner at the time , Great Britain profited from tariff reform ; in fact , Britain made significant inroads into the US markets subsequent to 1846 . Hoping to coordinate the repeal of the previously mentioned Corn Laws with US trade policy , a member of parliament voiced how both nations would benefit if England “ relaxed ” its policy “ with a corresponding relaxation in the United States .” The “ relaxation ” of US trade policy granted access to Midwestern wheat exports and — it was believed in the near future — would allow for more iron imports from Great Britain .
Consequently , British exports to the United States climbed from 6.8 million in 1846 to 11 million by 1847 . Not only did the volume of imports from Britain triple between 1846 and 1857 , but tariff revenues accrued to the United States rose from 27.5 million in 1842 to 54 million by 1856 . Undoubtedly , the bilateral nature of trade liberalization benefited both nations .
Until the start of the Civil War , tariff revision was supported by most Democratic administrations prior to Lincoln ’ s election in 1860 . During the war and reconstruction era , however , a return to protectionism governed US trade policy . Nonetheless , opposition by some congressmen and senators in the last decades of the 19th century advocated free trade or , at the very least , a revenue tariff . Still , protectionist ideas held firm at the national level well into the 20th century with only brief interludes — the 1990s through 2015 — embracing free trade ideology . As of this writing , duties on some agricultural imports have increased over the last several years , and there is a strong inclination to encourage domestic production of many goods otherwise imported . It ’ s another sign that US trade policy never has been , nor probably ever will be , static in nature .
Ramon Vasconcellos is a history professor and lecturer in Accounting and Economics at Barstow Community College in Barstow , CA . He has published numerous biographical and topical articles on the history of the West , particularly related to finance . Ramon has also taught Economics and History at the University of London .
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