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Second bank of the United States - History

Second bank of the United States - History

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The issue of tariffs was part of the economic history of the United States from the beginning. At the Constitutional Convention of 1787, delegates agreed to forbid Congress to place tariffs on exports (Article I, Section 9, clause 5 of the Constitution). Alexander Hamilton, the nation's first Secretary of the Treasury, proposed that Congress pass tariff laws to protective the young American manufacturing sector. Congress did not follow this recommendation to the extent that Hamilton advised, but relatively low tariff duties were established in 1789. These duties were gradually increased until 1804, when they were increased about 5% to help offset the costs of the Tripolitan War. Again, in 1812, the government increased tariffs to raise revenue for the War of 1812.

Before and during the War of 1812; embargoes, nonintercourse acts and actual fighting interfered with British trade with the United States, thus providing a stimulus to domestic manufacturing. After the close of the War of 1812, however, the United States was flooded with imports from Great Britain. Textiles, tea, coffee, sugar, molasses, and other items poured in as British manufacturers unloaded their inventories on the American market. While these products helped fulfill the pent-up demand for inexpensive consumer goods, they undermined domestic manufacturing. The states hardest hit were Rhode Island, Massachusetts and Pennsylvania.

Commercial interests in New England and the Mid-Atlantic states began lobbying for protective tariffs. Southern agricultural interests, however, protested that tariffs would increase the costs of consumer goods without producing any benefits to the Southern economy. Southern consumers were generally more dependent on cheap British imports than expensive Northern manufactures. Nevertheless, since Southern farmers had been able to sell some of their products to Northern manufacturers, they were somewhat open to compromise on tariffs.

In 1816, the United States adopted its first significant protective tariff. By that time, the American textile industry was in such poor condition that few in Congress opposed the tariff. The vote in the House of Representatives was 88 to 54, while the Southern and Southwestern members of the House voted 23 to 34. Ironically, South Carolina, which would vigorously defy a tariff about 15 years later, voted in favor of the 1816 tariff (4 to 3). The tariff placed a duty of 25% on imported textiles until June 30, 1819; after which the duty fell to 20%.
Sectional disagreements over tariffs remained. Although Congress passed the large textile tariff in 1816, most Southern and Southwestern politicians opposed the tariff, while most Northern politicians favored them. This inherent conflict remained unresolved, but dormant. In less than 20 years, the issue of tariffs would return to the forefront of American economic and political history.



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