High tariffs didn't make the U.S. rich in the 19th century. They won't this time.

On tariffs and 19th century economic growth

So…. tariffs are back in the news. Did you hear? On Wednesday, Trump launched his “Liberation Day” tariffs with rates that would make William McKinley blush. I started drafting a response but realized I’d be contributing to the overwhelming flood of instant reactions.

Instead of hot-taking Trump’s move (my general stance isn’t exactly a secret), I thought I’d finish up a related newsletter I had been working on where I answer the questions.

Did high tariffs fuel America’s industrial rise in the 19th century? What does the best research tell us?

This question matters because it underpins so many current arguments. Almost every tariff defender, from Trump to lawyers like Oren Cass, points to America’s 19th-century experience as proof that protection “works.” While they aren’t exactly clear what they mean (rarely offering an explicit causal claim, let alone a model), tariff fans like Cass will say things such as “Behind some of the world’s highest tariff barriers, the United States transformed from colonial backwater to continent-spanning industrial colossus.” That sounds almost causal, possibly even refutable: Tariffs caused the U.S.’s economic success.

But is that right? Put more concretely, did America grow because of or despite those tariffs? As the title more than alludes, I don’t think Cass has the right reading of the economic evidence.

While America’s economy grew rapidly under high tariffs in the late 19th century, recent research strongly suggests tariffs were incidental at best—and probably harmful—to U.S. growth.

Today’s newsletter will go through the best available evidence. The focus is on the 19th-century United States, roughly from the end of the Civil War through the Gilded Age and up to World War I when U.S. tariffs were among the highest in the world.

America: The Protectionist Success Story?

It’s not a completely implausible idea that tariffs help growth. During the late 19th century (circa 1870-1914), several of the fastest-growing economies had relatively high tariffs. The United States and Germany were rapidly industrializing and maintained steep import duties. Britain, by contrast, with its policy of free trade, grew more slowly.

From roughly the Civil War through World War I, the United States maintained staggeringly high tariffs on manufactures, often between 40-50% on dutiable imports.¹ While Britain gradually started to embrace free trade after 1846, the U.S. doubled down on protection. The average tariff on all imports was lower, around 30 percent by the 1880s, due to a significant list of duty-free raw materials. Compare this to our European peers. By 1900, Britain had near-zero tariffs on manufactures; Germany and France had moderate tariffs of about 5-15%; but the U.S. was the outlier, with rates sometimes exceeding 40%.

And undeniably, America’s economy boomed during this period. By 1900, the U.S. had overtaken Britain as the world’s leading industrial power. This seems like a slam-dunk case for the protective tariff.

If we look beyond the U.S., Kevin O’Rourke found that this positive correlation between tariff levels and growth rates held up even after controlling for factors like each country’s initial income and investment rates. In other words, around that historical period, the countries with higher tariffs tended to grow faster.

But correlation isn’t causation. Everyone knows this, even if politicians conveniently forget. The real analytical challenge is separating the tariff’s impact from all the other factors that made America grow.

How do we interpret this apparent paradox? Irwin addressed this question in an early review of the 1990s papers with cross-country growth regressions. He suggests several possible explanations:

1. Causation could run the other way: Countries that were rapidly industrializing might have had the political clout to impose tariffs. Tariffs may have been a consequence of industrial growth, not just a cause.

2. Omitted variables: Late 19th-century high-growth nations had other common traits like vast internal markets and ongoing nation-building. These fundamentals, not the tariffs, likely drove their growth.

3. Composition effects: Tariffs often applied to manufactured consumer goods, while many fast-growing economies were big exporters of primary products. The tariff-growth correlation might partly reflect that countries enjoying commodity booms also tended to impose tariffs for revenue.

These possible issues suggest caution in drawing pro-tariff conclusions from these 19th-century correlations. We need to be more careful.

The Boring (But Crucial) Matter of Counterfactuals

When we look at one country in history, we face an N=1 problem. We have no control group. The late 19th century United States also featured explosive population growth, mass European immigration, rapid technological innovation, westward expansion, abundant natural resources, high literacy rates, and stable property rights. Any of these could be the real growth driver.

This is where economic analysis becomes essential and where non-economists on both sides of the debate fall short. Most people rely on temporal coincidences. “America had high tariffs and grew rapidly.” What’s missing is any rigorous attempt to isolate the causal effect of tariffs from all these other factors.

This is not just a minor methodological quibble; it’s the entire ballgame. Without establishing some plausible causation, we are telling just-so stories and not providing evidence of whether tariffs mattered in any sense.

Economics provides tools to address this challenge. A hallmark of good economic analysis is the explicit construction of counterfactuals: What would have happened in the absence of the policy? This requires specifying models, testing assumptions, and using various empirical methods to simulate alternatives. Too often, people skip this step (even reading the economic history), instead offering assertions about industrial policy that are not grounded in the direction or magnitude of causal effects.

This methodological challenge requires creative research strategies. Fortunately, economic historians have tackled this question from multiple angles:

1. Industry-level studies: Did protected sectors grow faster than unprotected ones?

2. Natural experiments: When tariffs suddenly changed, what happened?

3. Counterfactual modeling: What would have happened without the tariff?

These methods aren’t perfect, but they’re better than the hand-waving “tariffs coincided with growth” arguments that dominate popular discourse. When someone claims that 19th-century tariffs made America great, we should ask: Compared to what? How much faster or slower would America have grown without the tariffs? What’s your model of how this works? How could we test it?

What Industry-Level Studies Tell Us

Klein and Meissner’s recent work is particularly revealing. They assembled data on tariffs by industry and linked it with manufacturing output and productivity statistics from 1870 to 1900. This panel data allows them to compare outcomes across industries with varying levels of tariff protection.