Tariff of 1789: Provisions, Revenue, and Sectional Impact

The Tariff of 1789 was the first major revenue law passed by the United States Congress under the new Constitution. Signed by President George Washington on July 4, 1789, and effective August 1, it imposed duties on imported goods to raise money for the federal government, pay down Revolutionary War debts, and give a measure of protection to American manufacturers.¹ It gave the national government its first reliable source of income and ended the fiscal paralysis of the previous decade.

Why Congress Needed a Tariff in 1789

Under the Articles of Confederation, Congress could not tax. It relied on requisitions from the states, which the states routinely ignored. The last requisition, in 1786, brought in $663. The Board of Treasury saw “no reasonable hope” of meeting $1.7 million in foreign debt owed to French and Dutch creditors, on top of $1.6 million in domestic war debt.²

Two earlier attempts to give Congress an impost had failed. A 1781 amendment for federal duties on certain imports died when Rhode Island refused and Virginia rescinded its approval. A 1783 proposal for a five-percent tariff over twenty-five years, earmarked for war debt, was killed by New York in February 1787. James Madison told George Washington that New York’s vote had “put a definitive veto on the Impost.”³ Those failures became a leading argument for the Constitution’s grant to Congress of the power to “lay and collect Taxes, Duties, Imposts and Excises.”⁴

When the First Congress convened at Federal Hall on March 4, 1789, the treasury was empty and the debts were due. Madison introduced a tariff bill as a “temporary expedient” built around a flat ad valorem rate.⁵ Thomas Fitzsimons of Pennsylvania countered with a plan that added specific protective duties on named goods. The House sided with Fitzsimons. Of 96 legislative days in the first session, 37 were spent on customs legislation, and six of the session’s 26 statutes concerned customs. Lawmakers preferred itemized duties over a flat rate partly to limit the discretion, and the corruption potential, of customs officers.⁶

What the Act Taxed

The statute used a layered approach. Most imports that were not specifically named fell under a blanket five-percent ad valorem duty. Above that baseline, Congress set specific duties on scores of individual products and higher ad valorem rates on certain categories.¹

Spirits: Jamaica-proof rum at 10 cents per gallon; other distilled spirits at 8 cents per gallon.
Wine: Madeira at 18 cents per gallon; other wines at 10 cents.
Sugar and coffee: brown sugar at 1 cent per pound; loaf sugar at 3 cents; coffee at 2.5 cents; cocoa at 1 cent.
Tea: 6 to 45 cents per pound, varying by type (bohea, souchong, hyson), by whether the tea came directly from China and India or through European middlemen, and by whether it arrived in American or foreign vessels.
Tobacco: manufactured tobacco at 6 cents per pound; snuff at 10 cents.
Footwear: boots at 50 cents per pair; leather shoes at 7 cents; silk or fabric shoes at 10 cents.
Metals and cordage: nails and spikes at 1 cent per pound; cables and tarred cordage at 75 cents per 112 pounds.
Higher ad valorem categories: carriages at 15 percent; goods from India or China at 12.5 percent; glassware, earthenware, gunpowder, hats, and ready-made clothing at 10 percent.

Certain raw materials American producers needed were exempt from the general five-percent duty, including saltpeter, tin, lead, brass, copper in plates, raw wool, cotton, dyeing materials, raw hides, and furs. Starting December 1, 1790, new duties took effect on hemp at 60 cents per 112 pounds and cotton at 3 cents per pound.¹

The act was set to expire on June 1, 1796, though Congress amended it repeatedly before then.¹

Drawbacks and Shipping Preferences

Merchants who re-exported imported goods within twelve months could reclaim the full duty they had paid, minus a one-percent administrative fee. That drawback provision mattered enormously during the Napoleonic Wars: by 1801, gross customs revenue implied an average tariff of 35 percent, but only 21 percent after drawback refunds.⁷

Goods imported in vessels built in the United States and owned by American citizens received a 10-percent discount on their duties.¹ The companion Duties on Tonnage statute of July 20, 1789, reinforced the preference by charging American-owned vessels 6 cents per ton, foreign-built vessels owned by Americans 30 cents per ton, and all other foreign vessels 50 cents per ton.⁸

How the Duties Were Collected

Congress passed three interlocking statutes in quick succession: the Tariff Act itself on July 4, the Tonnage Act on July 20, and an act establishing customs districts on July 31, 1789. Administration was placed under the Secretary of the Treasury on September 2.⁹

The July 31 act created dozens of customs districts across every state, each staffed with collectors, naval officers, and surveyors. Masters of arriving vessels had to present cargo manifests within 48 hours, and goods could not be unloaded until duties were paid or bonds posted. Collectors settled accounts with the Treasury every three months. Foreign-owned vessels were restricted to specific ports for unloading, and ships arriving from beyond the Cape of Good Hope were similarly limited.¹⁰

Alexander Hamilton took office as Secretary of the Treasury on September 11, 1789, and organized the customs service into a working system. Customs revenue from the four major ports of New York, Philadelphia, Baltimore, and Charleston grew from $1.975 million over 1785–1788 to $11.845 million over 1792–1795.¹¹ When statutory interpretation questions arose, Hamilton brought them back to Congress rather than deciding them himself.⁶

What the Tariff Raised

Gross customs revenue reached about $1.0 million in 1790, the first full year of operation, and $1.5 million by 1792 (net revenue that year was about $1.4 million after drawbacks).⁷ Federal income did not reach $10 million until 1800 and did not exceed $20 million until 1816. Collections averaged roughly a dollar or two per person.¹²

Small numbers, but the stakes were fiscal solvency. The federal government could now pay salaries, meet obligations, and begin servicing the national debt. Customs duties would remain the dominant source of federal revenue for more than a century, generating 50 to 90 percent of federal income until the Sixteenth Amendment authorized the income tax in 1913.¹²

Was It a Revenue Measure or a Protective Measure?

The act’s preamble claimed both purposes. It declared the tariff “necessary for the support of government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures.”¹ Which purpose really drove the bill has been argued for two centuries.

On the revenue side, the five-percent baseline was too low to block imports. Madison called his bill a temporary expedient for an empty treasury. Writing in 1835, Condy Raguet called it “preposterous” to think a five-percent duty was meant to encourage manufactures when agriculture was still the most profitable use of American capital.⁵ The U.S. International Trade Commission later concluded that as a protective measure, the 1789 tariff was “too low to be effective.”¹²

On the protection side, no member of Congress argued that industrial protection was unconstitutional or undesirable, and members from agricultural states sought protection for their own products. Fisher Ames of Massachusetts championed nails, Fitzsimons pushed for beer and other Pennsylvania manufactures, and George Clymer argued for steel. Senator William Maclay of Pennsylvania noted on June 2 that many goods had been taxed at 12 percent under Pennsylvania law and 13 percent in New York, whereas the proposed federal rates were only 7.5 percent, which would put manufacturers on “worse ground” than existing state protections. His position, he recorded, was “opposed by the Southern people.”⁵

Both motives were real. The act was a revenue bill that embedded a protective principle into federal law from the start, and the U.S. International Trade Commission’s own history described the tension between those two functions as “long-standing, unresolved” throughout American tariff history.¹²

The Sectional Split It Started

The 1789 debate planted a sectional conflict that would intensify for decades. Northern manufacturers favored duties high enough to shield their industries from cheaper foreign goods, especially English textiles and metal products. Southern planters, whose wealth depended on exporting cotton and other commodities, favored free trade and saw tariffs as raising the cost of the manufactured goods they had to buy.¹³

In 1789, that opposition was muted. Southern representatives did not challenge the constitutionality of protection, and some sought protective duties for regional products like hemp and indigo.⁵ As rates climbed, the conflict sharpened. The 1828 “Tariff of Abominations” provoked a near-constitutional crisis when South Carolina, guided by John C. Calhoun’s doctrine, passed an ordinance of nullification in 1832. President Andrew Jackson called nullification treasonous. The standoff was resolved through Henry Clay’s compromise, which paired gradual rate reductions with the Force Act authorizing military enforcement of federal law.¹³ The withdrawal of Southern Democratic congressmen after the 1860 election shifted the balance toward the industrial North and enabled passage of the protectionist Morrill Tariff Act of 1861.¹²

How the Rates Changed After 1789

The 1789 tariff was amended repeatedly, almost always upward, as the government took on new expenses.

August 1790: higher duties on Madeira wine, tea, and coffee to fund the assumption of state debts.
March 1791: increased duties on spirits.
1792: rates rose again to finance protection of the western frontier; the baseline ad valorem rate climbed from 5 percent to 7.5 percent.
1794: another 2.5-point increase brought the base rate to 10 percent to accelerate debt reduction.
1797: higher specific duties on sugar, molasses, and tea; the base ad valorem rate rose to 12.5 percent.
1804: a further 2.5-point increase (to a 15-percent base) funded naval operations against the Barbary pirates.
1812: Congress doubled all tariff rates to finance the War of 1812.

⁷

The Tariff of 1816 is generally considered the first federal tariff whose primary aim was promoting American manufacturing rather than raising revenue. It kept rates above prewar levels, with a 25-percent ad valorem duty on cotton goods and a minimum-valuation provision that effectively blocked cheap foreign textiles.¹⁴

Did the Protection Actually Work?

Scholars have not settled this. The act did direct some benefits toward specific sectors. Domestic brewers gained from the duty on imported beer, Massachusetts nail manufacturers received insulation from foreign competition, and the differential tonnage duties gave American shipbuilders and merchants an advantage in the carrying trade.⁵

The consumer side bore costs. Merchants raised prices on imported goods in anticipation of the new duties, and Senator Maclay estimated that about $1 million was paid by consumers but never reached the treasury because of legislative delays that let importers stock up before the duties took effect.⁵

Broader assessments are skeptical. One analysis found “little evidence” that the American System of tariffs and industrial subsidies was responsible for 19th-century economic growth, calling the claimed link “spurious.”¹⁵ The U.S. International Trade Commission’s own historical review concluded that “the specific level of the tariff rates actually had a relatively minor influence on the well-being of so complex and differentiated an economic entity as the United States.”¹² Whatever protection the 1789 rates offered was modest. The larger protectionist battles came in the 1820s and after.

Why the 1789 Framework Still Matters

The constitutional principle established in 1789, that Congress holds the tariff power, resurfaced at the Supreme Court in 2026. After the Trump administration imposed tariffs on imports from Canada, Mexico, China, and other trading partners under the International Emergency Economic Powers Act (IEEPA), the question of who holds tariff authority went to the Court.

In Learning Resources, Inc. v. Trump, decided February 20, 2026, the Court ruled 6–3 that IEEPA does not authorize the president to impose tariffs. Chief Justice John Roberts, writing for the majority, held that Article I, Section 8 vests the taxing power, including the tariff power, exclusively in Congress. The Framers, Roberts wrote, “did not vest any part of the taxing power in the Executive Branch.” The Court noted that in IEEPA’s half century of existence, no prior president had invoked it to impose tariffs, and it held that a president must “point to clear congressional authorization” to justify such power.¹⁶ The constitutional framework the ruling turns on traces directly to the First Congress’s decision in 1789 to exercise its newly granted taxing power.¹⁷

1
FRASER, Federal Reserve Bank of St. Louis. Tariff Act of 1789
2
Constitution Annotated. Historical Background on the Taxing Power
3
Center for the Study of the American Constitution. Americas First Proposed Federal Tariff: The Imposts of 1781 and 1783
4
National Constitution Center. Article I, Section 8, Clause 1
5
University of Chicago Press Journals. The Tariff Act of 1789
6
George Mason University, Administrative State. Working Paper on Early Customs Administration
7
NBER. U.S. Tariff History Working Paper
8
The Avalon Project, Yale Law School. Act Imposing Duties on Tonnage
9
U.S. Customs and Border Protection. 1789 First Congress Provides Customs Administration
10
GovInfo (Statute at Large). Act of July 31, 1789
11
NBER. Hamilton and Early U.S. Trade Policy
12
U.S. International Trade Commission. History of U.S. Tariff Legislation
13
Encyclopedia.com. Tariff Act of 1789
14
U.S. International Trade Commission. U.S. International Trade Commission Centennial Publication
15
Cato Institute. The Problem of the Tariff in American Economic History
16
Supreme Court of the United States. Learning Resources, Inc. v. Trump
17
SCOTUSblog. Learning Resources, Inc. v. Trump