Would Alexander Hamilton Support Tariffs in 21st Century America?


In spite of the economic pain that tariffs cause, even or especially retaliatory ones, support is steadfast in some quarters for President Trump's decision to impose tariffs on steel and aluminum imports, particularly from China, and for his threat that possibly more tariffs are coming.

Supporters point to Founding Father Alexander Hamilton as their newest "ally" in defense of protectionism. In their assessment, since Hamilton believed in protective tariffs to help the American economy grow at its inception, it is also wise to enact tariffs today. But is that so?

Matt Winesett, editor of the AEIdeas Blog, did some digging and found some important information about Hamilton's perspective. As Hamilton biographer Ron Chernow wrote on the subject:

In the best of all possible worlds, Hamilton preferred free trade, open markets, and Adam Smith’s “invisible hand.” He wrote later in life, “In matters of industry, human enterprise ought doubtless to be left free in the main, not fettered by too much regulation, but practical politicians know it may be beneficially stimulated by prudent aims and encouragements on the part of the government.”

At this early stage of American history, Hamilton thought aggressive European trade policies obligated the United States to respond in kind. He therefore supported temporary mercantilist policies that would improve American self-sufficiency, leading to a favorable trade balance and more hard currency. For a young nation struggling to find its way in a world of advanced European powers, Realpolitik trumped the laissez-faire purism of Adam Smith.

In Hamilton's time, the U.S. was in its infancy and had few tactics available for a different course of action. Hamilton did not want tariffs to be a permanent measure that ended up stifling trade. Rather, he advocated that from the U.S.'s position of weakness, short-term measures could achieve more favorable trade agreements with other nations.

As Winesett also notes, one of the justifications by steel tariff supporters for the protective measure is simply not even relevant: the national security concern.

And as for the self-sufficiency concern (here Hamilton’s main worry was that America wouldn’t possess the industrial base necessary to supply its own defense), national security justifications for our recent tariffs are a red herring. Per the Commerce Department’s report, the DOD only needs 3% of current US steel production to meet its needs.

Would Hamilton be a dogmatic free trader or protectionist if he were alive today? That's impossible to say, given the changing technologies and scenarios we have had over time, and one can only speculate. But if we're going to be originalist in our interpretations of the Founders, Hamilton's positions were not as cut and dry as those people propping his argument up wish to believe.

Was Hamilton an uncompromising laissez-faire free trade advocate that would have made Adam Smith proud? No, but he was not an uncompromising protectionist either. If anything, his approach to tariffs was part of a strategy to achieve freer trade.

Those who point to Hamilton to support tariffs may want to consider the nuances.