Tariffs have a long history in the US – two charts tell that story
There’s a chart that’s been doing the rounds in recent weeks – American businessman Marc Andreessen tweeted it, and then it was reposted by Donald Trump himself.
The chart is pretty simple: it shows the proportion of American federal government revenues coming from tariffs, going all the way back to the early days of American independence.
And to glance at, it tells a compelling story. For nearly all of the 19th century, tariffs imposed on goods imported into America provided more than half the government’s revenues.
The president’s interpretation was as follows: “The tariffs, and tariffs alone, created this vast wealth for our country. Then we switched over to income tax. We were never so wealthy as during this period. Tariffs will pay off our debt and, MAKE AMERICA WEALTHY AGAIN!”
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The first half of his post is quite true. America’s federal economy was largely built on revenues from tariffs. When Alexander Hamilton was designing much of the federal infrastructure, not to mention paying the debts from the War of Independence, he chose to fund it with tariffs and duties on goods imported to the country.
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Revenue wasn’t the only reason for the tariffs. They were there, too, to protect the country’s nascent industries. But those tariffs were the main source of income for a long time. What changed? Well, from the late 19th century onwards, the size of the American state expanded. Paying for the Civil War was expensive; funding a growing welfare state and national infrastructure in the following decades likewise.
But tariffs can only go so far. There is only so high one can lift these fees before they begin to stifle activity, making goods so expensive to import that domestic consumers face economic damage. That brings us back to the data in the chart approvingly cited by the president.
Take the same numbers and divide them by GDP – the total size of the US economy – another way of skinning it (indeed, the way you’d normally look at long-run historical figures like this). Now everything looks somewhat different. You can see that at no point in American history – even in those early days when tariffs were far higher than today and a far more important source of revenues – did the total amount they raised exceed 6% of gross domestic product. This is not accidental.
It was because tariffs couldn’t raise enough to finance the Federal administration that successive administrations began to collect other taxes on American citizens rather than imports, starting with excise taxes and income taxes in the Civil War. Those taxes, collected by the Internal Revenue Service, ballooned in the following decades – as did the size of the state.
Today the American federal budget is orders of magnitude bigger than two centuries ago (albeit still much smaller than those you find in Europe). The new administration has made it an explicit policy to cut back on waste, led in part by Elon Musk and his DOGE (the Department of Government Efficiency, whose name was seemingly chosen in order to fulfil Mr Musk’s ambition to turn everything into a meme). But there are limits to how far one can cut: a superpower with a large military, vast infrastructure networks such as road and rail, not to mention public health and education systems, does not come for free.
Even so, raising revenue is just one purpose of tariffs. They can also be used as a negotiating tool with other countries (indeed, this might well be their main function in the hands of Mr Trump). They can be used to protect domestic industries against competition.
Whatever the purpose, after decades of relatively free trade around much of the world – most notably America itself – we are living now in an era where tariffs are back. And this story has only just begun.
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A state of emergency has been declared in South Carolina as wildfires caused by dry and gusty conditions have forced people to evacuate some areas.
More than 175 fires covered 6.6 square miles in the state on Sunday as the National Weather Service warned of an increased risk of blazes in the region.
The number of fires was down to 163 by early Monday, the state’s forestry commission said.
South Carolina governor Henry McMaster declared a state of emergency on Sunday to support the wildfire response effort and a state-wide burning ban is in effect.
People in eight neighbourhoods were forced to evacuate as several fires raged in the state’s Horry County, officials said.
Soldiers used two Blackhawk helicopters to drop water 600 gallons at a time on the blazes, the South Carolina National Guard said on Sunday.
Meanwhile, firefighters made progress containing a fire in Carolina Forest, where people had been ordered to evacuate several neighbourhoods, according to Horry County Fire Rescue.
Footage showed some people running down the street as smoke filled the sky.
However, Horry County Fire Rescue announced by late Sunday that Carolina Forest evacuees could return home.
The Red Cross of South Carolina said approximately 135 Carolina Forest residents had taken shelter in a county recreation centre.
Smoke is seen rising from fires in Horry County. Pic: AP/Horry County Fire Rescue
The fire in the area had burned 2.5 square miles as of Sunday evening, the South Carolina Forestry Commission estimated.
No structures had succumbed to the blaze and no injuries had been reported as of Sunday morning, officials said.
It came as fire crews were working to contain multiple wildfires burning in four forests across North Carolina.
The largest covered around 0.6 square miles and burned in Uwharrie National Forest – about 50 miles east of Charlotte.
The North Carolina Forest Service said on Sunday that it had been made progress on the fire, reaching about one-third containment.
People flee an area in Myrtle Beach. Pic: AP
The small southwestern town of Tryon in Polk County, North Carolina, had urged some residents to evacuate on Saturday as a fire spread rapidly there.
The evacuations remained in effect on Sunday.
A decision on whether to lift the evacuation orders was expected to be made on Monday after intentional burns are set to try to stop the fire from spreading.
That fire had burned about 0.8 square miles as of Sunday evening, with 0% containment, according to the Polk County Emergency Management and Fire Marshal’s office.
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A helicopter drops water to help contain a fire in the Carolina Forest area. Pic: AP
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The North Carolina Forest Service was conducting water drops and back-burning operations on the ground and residents should expect a lot of smoke during those operations, officials said.
It comes as at least six active fires were burning in Georgia on Sunday, with nearly 5.8 miles burned in a seven-day span that brought the region gusty winds and low humidity, according to a Georgia Forestry Commission fire summary.
Officials have not said what caused any of the fires.
The dry and gusty conditions fuelling the fires are expected to fade as a cold front pushes out the dry air mass over the southeast of the US and brings rain by Tuesday, the National Weather Service said.
The convergence of warmth, dry air and gusty winds is not inconsistent with the season’s La Niña weather phenomenon, which is associated with warmer, drier winters in the Carolinas, according to North Carolina State University.
The blazes come after two wildfires in Los Angeles killed 29 people and scorched thousands of acres across 24 days.
More than 18,000 structures were damaged or destroyed in the deadly Eaton and Palisades blazes, which swept across California in January.
Cryptocurrency prices have jumped after Donald Trump revealed he would like Bitcoin and other lesser-traded tokens to be in a new US strategic crypto reserve.
He said his January executive order on digital assets would create a stockpile of currencies including Bitcoin, Ethereum, XRP, Solana and Cardano (ADA).
The names had not previously been announced.
The American president said in a post on Truth Social: “A US Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration, which is why my Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA.”
“I will make sure the US is the Crypto Capital of the World.”
“And, obviously, BTC and ETH, as other valuable Cryptocurrencies, will be at the heart of the Reserve,” he said in a follow-up post. “I also love Bitcoin and Ethereum!”
Bitcoin, the world’s largest cryptocurrency by market value, rose over 11% to $94,164 after Sunday’s announcement.
Ethereum, the second-largest cryptocurrency, was up around 13% at $2,516.
XRP surged 33% while the token tied to Solana jumped 25%. Cardano’s coin soared more than 60%.
Bitcoin was trading up around 20% from last week’s lows.
US President Donald Trump signed an executive order on cryptocurrencies in January. Pic: Reuters
The total cryptocurrency market rose about 10%, or more than $300bn (£238bn), in the hours since the announcement, according to cryptocurrency data and analysis company CoinGecko.
This is the first time Mr Trump has specified his support for a crypto “reserve” rather than a “stockpile”. While the former assumes actively buying crypto in regular installments, a stockpile would not sell any of the crypto currently held by the US government.
Mr Trump is hosting the first White House Crypto Summit on Friday, and investors will be watching closely for more clues about the direction of the reserve plans.
His family have also launched their own coins, including his wife Melania.
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Mr Trump first introduced the idea of a Bitcoin stockpile, which would “keep 100% of all the Bitcoin the US government currently holds or acquires into the future” last summer at major industry conference Bitcoin 2024 in Nashville.
After his re-election to the White House in November, there were more calls for a strategic Bitcoin reserve, helping to send the price of the flagship cryptocurrency to new all-time highs.
Under his Democratic predecessor, Joe Biden, regulators cracked down on the industry in an attempt to protect Americans from fraud and money laundering.
Under Mr Trump, the Securities and Exchange Commission has withdrawn investigations into several crypto companies and dropped a lawsuit against Coinbase, the largest crypto exchange in the US.
But in recent weeks, crypto prices have fallen sharply, with some of the biggest digital currencies erasing nearly all of the gains made after Mr Trump’s election win triggered excitement across the industry.
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