For most Americans – especially those of us who aren’t experts in supply chains, offshoring or Smoot-Hawley – “tariff” is a mysterious, even foreign term. To dispel some of that, the following is a brief explanation of tariffs and their role in America’s past and present.

What are tariffs? Tariffs have been central to trading transactions for millennia. Their roots stretch back to the first tolls placed on goods transported by caravans in ancient Mesopotamia centuries before the birth of Christ. So, they aren’t particularly mysterious.

But the word is indeed foreign: Middle East expert Rayhan Uddin says the lineage of the English word “tariff” can be traced to ancient Turkic, Persian and Arabic variations of the word “ta’rifa,” which means “to set out fees to be paid.”

Today, tariffs are fees on imports. As the Tax Foundation explains, tariffs are paid when goods or services are imported into a country.

What did America’s founders think about tariffs? The founders generally supported them. The Federalist Papers, for example, envisioned a system in which taxation “will consist, in a great measure, of duties,” with “the greatest part of the national revenue … derived from taxes of the indirect kind, from imposts and from excises.”

Indeed, between the ratification of the Constitution and the Civil War, tariffs accounted for approximately 80% to 95% of federal revenue, Scott Burns and Caleb Fuller of the Independent Institute note. Even in the early 1900s, they accounted for more than half of federal revenues. Then came the income tax, which proved a more efficient way of collecting revenue.

While the founders recognized the power of tariffs to raise revenue, they also understood their power to constrain economic activity. Tellingly, the founders, in the Constitution, prohibited states from interfering in interstate commerce by erecting tariffs against other states: “All duties, imposts and excises shall be uniform throughout the United States.” The result was the creation of an American free-trade zone.

Did tariffs fund most government functions in earlier periods of U.S. history? Yes. As David Hebert of the American Institute for Economic Research explains, they almost exclusively funded the federal government until around 1913. Of course, it had far fewer responsibilities back then and thus needed far less revenue to carry out its responsibilities.

How have tariffs been used in U.S. history? President Donald Trump has described “tariff” as “the most beautiful word in the dictionary.” Free-market economists may disagree, but the Tariff Act of 1789 was the first major bill passed by Congress. The U.S. average tariff rate on all imports was 57% in 1830, fell to 14% on the eve of the Civil War, jumped to 38% by the end of the war, fell to 5.7% by the end of World War I, spiked to 20% in 1933 and steadily fell after World War II.

There were exceptions to the postwar tariff-cutting trend. Presidents Gerald Ford and Jimmy Carter levied duties/tariffs on foreign oil, President Ronald Reagan on Japanese electronics, President George W. Bush on foreign steel and President Barack Obama on Chinese tires.

Even with those targeted tariffs, the U.S. average rate on all imports fell to just 1.4% by early 2017. But the pendulum has swung back in recent years. Trump increased tariffs on numerous countries during his first term, and President Joe Biden extended and expanded those Trump had slapped on China. Today, in the wake of the 2025 tariffs, the average U.S. rate is 18% – the highest since 1934, Yale researchers report.

What does this new era of tariffs mean for the world? Tariffs generally lead to retaliatory tariffs. After Washington launched its 2025 salvos, the European Union (EU) responded with tariffs on made-in-America bourbon and motorcycles. China ceased importing U.S. soybeans and limited shipments of rare-earth elements. Although some have been eased after bilateral negotiations, U.S. tariffs on the EU and China are higher today than they were at the beginning of 2025.

When did U.S. policymakers begin the shift away from tariffs? During World War I, President Woodrow Wilson argued for “removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions,” but the interwar years saw massive tariff increases. The protectionist Smoot-Hawley Tariff Act of 1930 raised them to their highest level since 1828. Other nations responded, and the world average tariff rate in the 1930s hit an estimated 50%.

Between 1929 and 1934, world trade fell 66%. Concluding that protectionism had helped sow the seeds of war, President Franklin D. Roosevelt and British Prime Minister Winston Churchill reasoned that the postwar world should be characterized by free trade and a liberal economic system. Thus, they called for “access, on equal terms, to the trade and to the raw materials of the world” and “the fullest collaboration between all nations in the economic field.”

After the war, the United States midwifed a free-trade zone in western Europe, constructed an ever-widening web of international trade agreements and championed the General Agreement on Tariffs and Trade (GATT), which lowered trade barriers. As GATT and its successor, the World Trade Organization, steadily shrank the world average tariff, the U.S. average rate on all imports fell from 10% in 1946 to 7% in 1970, 2% in 1996 and 1% in 2008.

Critics of Trump’s approach to trade forget that the postwar free-trade consensus began eroding before he took office. In 2008, then-Sen. Obama called the North American Free Trade Agreement (NAFTA) “an enormous problem.” Then-Sen. Hillary Clinton threatened to “opt out” of it. And both opposed trade deals with Korea, Colombia and Panama. In 2016, Trump labeled NAFTA “a disaster” and opposed the Trans-Pacific Partnership trade deal, as did Clinton.

Are tariffs a tax? Yes. “Tariffs are taxes imposed by a government on imported goods,” a Federal Reserve report explains. The 2025 tariffs “amount to an average tax increase per U.S. household of $1,300 in 2025 and $2,000 in 2026,” according to the Tax Foundation.

Can tariffs replace income taxes or pay down the debt? They do raise government revenue, then as now. The 2025 tariffs, for example, could raise $2.4 trillion over the span of 10 years. That’s not an insignificant amount of money – until we compare it to the enormous size of federal revenues, outlays and deficits. Burns and Fuller note that in 1800, federal spending represented 2.5% of GDP; today, it represents 25%. The federal government takes in $5.2 trillion in tax revenue annually, spends nearly $7 trillion annually (which explains the deficit), and carries a debt of $37 trillion. In short, tariffs cannot replace other kinds of taxes and cannot pay down the debt given current rates of spending.

Who pays the cost of tariffs? Most costs are passed to the consumer in the form of higher prices for the tariffed item. A Kiel Institute analysis of the 2025 tariffs concludes U.S. consumers and importers bore 96% of tariff-related costs. CNET reports that prices for televisions, gaming systems and ground coffee went up after the increase. CNBC reports price increases on toys, jeans and kitchenware. And a Wall Street Journal survey found that Amazon’s prices on soup, tea, cleaning supplies and cough medicine increased.

Are tariffs popular? Yes and no. Americans tend to support them in the abstract, as we generally like the idea of protecting U.S. producers. In 2019, for example, 52% of Americans expressed support for tariffs on Chinese imports. However, when they start to negatively impact American consumers (via increased prices for imported goods and goods that rely on imported inputs) and/or American producers (fewer overseas markets due to retaliatory actions), support dissipates.

China’s imports of U.S. soybeans fell to 0 in late 2025, as Beijing responded to Washington’s tariff blitz earlier in the year. That represented a $12.6 billion loss for American farmers. GM revealed that those tariffs cost the company $4.5 billion. And CNBC reports that if the iPhone 16 Pro were made in the United States, the $1,199 phone would cost $3,500.

Given those numbers, it’s no surprise that by late 2025, 61% of Americans opposed the new tariffs.

Can the president raise tariff rates without congressional involvement? Technically, no. The Constitution gives Congress the sole “power to lay and collect taxes, duties, imposts and excises.” However, as the Constitution Center notes, “Over time … Congress gave the president expanded powers on its behalf to enact tariff policies.” One of the instruments it used to surrender some of its power is the International Emergency Economic Powers Act (IEEPA).

Trump cited IEEPA to justify his 2025 tariff increases, claiming he was acting in response to national emergencies. But this justification was unprecedented and triggered legal challenges. A federal appeals court struck down the 2025 tariffs, concluding that IEEPA does not grant the president “the power to impose tariffs, duties or the like, or the power to tax.”

The Supreme Court upheld that decision and swatted away claims that tariffs aren’t taxes, bluntly concluding, “The framers did not vest any part of the taxing power in the executive branch … (T)he fact that no president has ever found such power in IEEPA is strong evidence that it does not exist.” In response, the president has shifted to other executive authorities to justify his tariffs.

Are trade deficits necessarily bad? Pointing to America’s trade deficit, Trump says “(w)e’re losing $5 billion a day on trade” and contends our trade partners are “ripping us off.”

Americans have the means to purchase lots of stuff. But we want to get the most for our money. That’s where trade comes into play – imports drive down costs for

U.S. consumers by expanding purchasing options – and how trade deficits emerge. We buy iPhones, laptops and TVs assembled in China; vegetables, beef, petroleum and car parts from Mexico and Canada; machinery and cars from Japan, Korea and Europe. Not coincidentally, the United States runs trade deficits (in goods) with China, Europe, Japan, Canada and Mexico. Of course, all the term “trade deficit” means is that American consumers have chosen to use their money to purchase more goods from those countries than we’ve sold to those countries.

In this system of free exchange, the United States gets the goods it wants and needs, while our trading partners get the economic resources they want and need.

This is not dissimilar from how a typical household functions: Instead of raising crops, most of us go to the grocery. Instead of knitting our own clothes and cobbling our own shoes, we order them online. Instead of toiling against weeds, we hire a lawn-care company. Yet who among us worries about having a “trade deficit” with Walmart, L.L.Bean or TruGreen?

As Adam Smith, the father of free-market economics, observed, “It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy …. What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”

Would a free-trader ever say that tariffs are sometimes necessary? There’s an argument to be made that tariffs can be used to force fairer trade, though recent decades illustrate that the best pathway to fairer trade is freer trade: There were 23 regional trade agreements in 1988; by 2012, there were 233. This proliferation of deals whittled down the average applied tariff rate from 33.96% to 2.88%.

There’s an even stronger argument for using tariffs to protect U.S. industries connected to national security. “Maintaining the production of American steel is extremely important to our national security and our defense industrial base,” Trump contends.

Smith would agree. “When some particular sort of industry is necessary for the defense of the country,” he observed, it is appropriate “to lay some burden upon foreign for the encouragement of domestic industry.”

This essay was originally published in the September 2026 issue of The American Legion Magazine.