Tag Archives: Tariffs

Cotton Triangle: A Cause of the Civil War

(November 14, 2019) Historians hostile to Confederate heritage sometimes use the graph below to falsely claim that antebellum Southern complaints about tariffs were unjustified because New York alone accounted for the great majority of tariff collections. The assertion is false for two reasons.

First, the graph merely shows where tariffs were collected, not where the consumers who actually absorbed the cost of the duties resided. Since the eleven states that would become the Confederacy contained 29% of America’s population, it’s reasonable to assume that they paid about 29% of America’s tariffs in the form of inflated prices for the imported goods.

Second, and more importantly, Southerners complained about the unfairness of protective tariffs, not revenue tariffs. The classic example of a revenue tariff was the one on coffee, an item that could not be produced in America but was consumed in every state. In contrast, protective tariffs were not intended to raise revenue and were outlawed in the Confederate constitution. They were designed to protect domestic manufacturers from overseas competition. In fact, an optimal protective tariff raises no revenue because it blocks all competitive imports for the sheltered item. Most antebellum protective tariffs benefitted Northern producers, such as iron makers. They caused the antebellum South to buy $200 – $300 million of domestic goods annually from the North that would have otherwise been sourced from Europe. In contrast, the graph suggests that America’s total tariff bill was only $48 million in 1859.

New York’s tariff collection dominance resulted from a shipping pattern known as the “cotton triangle.” On the eve of the Civil War cotton accounted for about two-thirds of all American exports and New York was the pivot point. The following “cotton triangle” explanation is excerpted and edited from Doug Harper’s website:

Early-and-mid nineteenth century Atlantic trade depended upon scheduled service “packet lines.” By 1817 such lines became the way to do trans-Atlantic business. The successful port needed to have good two-way cargo volumes. The New York packet lines succeeded because they sucked in all the eastbound cotton cargoes from the South. Thus, Northeastern-owned American vessels sailed to a cotton port carrying goods for the Southern market where they loaded cotton for Europe, which got 80% of its feedstock from America. They steamed back from Europe loaded with manufactured goods and occasionally immigrants.

Since this “triangle trade” involved a domestic leg between New York and Southern ports, foreign vessels were excluded by an 1817 law.  Being thus protected by the federal government and subsidized with postal contracts, the “cotton triangle” became a monopolistic trade practice for American shipowners and New York trading interests.

By creating a three-cornered trade, New York dragged the commerce between the Southern ports and Europe out of its normal course and collected a heavy toll upon it. This trade might have otherwise become direct shuttles between Southern ports and Europe had New York not interposed by developing its coastal packet lines, without which it would have been nearly impossible to make its east-bound transoceanic packet runs profitable.

New York’s income from triangle trade for financing, insurance, shipping, commissions and other services amounted to perhaps 40% of every dollar paid for Southern cotton. By the time Southern ports started offering transatlantic packet service in 1851, New York was far ahead in terms of departure-arrival frequencies and routes.

America’s foreign trade rose from $134 million in 1830 to $318 million in 1850 and tripled again in the 1850s. Between two-thirds and three-fourths of imports entered through New York. Thus, any trading the South did had to go through that city.

Since New York was collecting as much as 40% of the value of America’s cotton, it initially hoped to persuade the seceding states to voluntarily return to the Union and was sympathetic to their complaints. After the Confederacy revealed its intent to remain independent and levee much lower tariffs than the United States, New Yorkers realized they were about to lose the “cotton triangle” monopoly. Consequently, they began urging the federal Government to militarily coerce the cotton states back into the Union.  They chose war in order to protect their own economic interests. As always, money makes the world go ’round.

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Learn more about the cotton trade and the furtive intersectional trade between the North and South by reading:

Trading With the Enemy by Philip Leigh

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Civil War Lessons From Today’s Farmers

(July 1, 2019) Anyone with even a casual interest in Trump’s tariff has noticed that farmers are complaining.

Food, beverages and feed are America’s biggest exports. Soybeans and pork are major items sent to China. Since both have been slapped with retaliatory Sino tariffs, American producers are losing the market to other countries such a Brazil. Consequently, President Trump assembled a $16 billion farmer bailout package, to be funded by the tariffs collected for industrial products like steel and aluminum.

Soybean Farmer

Here are the lessons:

  1. Most historians analyzing the tariff as a cause of the Civil War don’t consider the negative affect on the demand for exported farm goods. Instead they only consider the duties as uniformly applied throughout the country. This leads them to reason that the North paid most of the tariffs because it had a greater population.
  2. They fail to consider that protective tariffs on manufactured goods caused the Europeans to buy less farm goods from America. They could not generate the exchange credits needed to buy American agriculture products unless they could sell their manufactured items into our country. High tariffs impeded that.
  3. As the dominant exporter of agricultural products (cotton and tobacco) the demand for Southern produce was disproportionately penalized. Unlike today’s soybean farmers who might be located anywhere from Wisconsin to Mississippi, the antebellum South was the America’s largest export region by a wide margin.
  4. As a result, Southerners were trebely penalized by tariffs on manufactured items. First, they had to pay the tariff on the imported products they bought. Second, they had to pay an artificially higher price for domestic substitutes because those selling prices were inflated by the tariff. Three, they lost income as sales of their farm goods were constrained by the lower demand overseas caused by the American tariffs.
  5. Unlike today’s soybean and pork farmers, the antebellum Southern farmers had no federal bailout. Thus, the government subsidized the Northern manufacturers with tariffs but made no compensation to Southern farmers for their lost sales. This was a big deal. It is why South Carolina nullified the Tariff of Abominations in 1832.
  6. The U. S. Constitution specified that all taxes should be “uniform.” Northerners believed that “uniform” meant only that tariffs on each item should be the same (within its class) regardless of where it was purchased. Southerners had a more liberal interpretation. “Uniform,” they argued, should mean that the economic impact will not discriminate against any state or region. As the Trump tariffs show, the adverse result is focused on agriculture. In antebellum America that constituted regional discrimination because so much of the farm exports came from the South. Even though the economic affect was disproportionately negative on the South, they got nowhere with the argument politically.

In sum, America’s agricultural exports have always been a casualty of protective tariffs on industrial products. While the harmful impact is more spread out geographically today, in antebellum America it was concentrated in the South.

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Comparing Words and Deeds

(April 24, 2019) Critics of the Confederacy often point to the Declaration of Causes for secession among selected Rebel states as evidence that the Civil War was “all about” slavery. The Civil War Trust, for example, notes that four of the original seven Confederate states cited slavery as a prime reason for secession.* Critics often attack anyone who disputes the slavery-was-everything interpretation with remarks such as, “The Declaration of Causes plainly say that the primary concern among contemporary Southern leaders was the preservation of slavery. You’re a racist bigot to deny it.”

Aside from the routine ad hominem, that argument has two flaws.

First, secession need not have led to war. Northerners could have let the Southern states depart peaceably. Many Yankee leaders advocated, or were satisfied with, a peaceable separation. Among them were Horace Greeley, Lincoln’s future War Secretary Edwin Stanton and future President Rutherford B. Hayes, as well as many others. There was no danger that the South would start a war by invading the North. The war came only after Northerners resolved to coerce the seven cotton states back into the Union. That solitary decision caused Virginia, North Carolina, Tennessee and Arkansas to join the seven-state Confederacy and double the number of whites in the new nation. All four had remained Union-loyal during the secession crisis.

Second, the slavery-was-everything argument ignores the fact that people reveal their motives more by their actions than their words. We all learned that in kindergarten, or earlier. The sectional differences over tariffs provide an example of true North-vs.-South motivation.

Prior to the Civil War in 1860 the average tariff on dutiable items was 19%. During the war, and for forty-five years thereafter, the figure was 45%. Thus, once Northerners gained control of the federal government they increased dutiable item tariffs by 130% and kept them there for half a century.

Therefore, high protective tariffs were undeniably a primary war aim for the North. While modern historians will dispute the point, their arguments ignore the compelling and protracted post-war evidence. I have read a number of such essays and have yet to find a solitary one that even hints that the author was aware that the winning side imposed high protective tariffs long after the war was over.

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*The CWT also cites Virginia’s single and oblique reference to slavery in its Declaration of Causes, but ignores the fact that Virginia remained Union-loyal during the secession crises. She only decided to join the Confederacy after Lincoln resolved to militarily coerce the original seven cotton states back into the Union.

Experiencing History

(March 23, 2018) As I age, some younger historians increasingly portray public events witnessed in my lifetime in a way that contradicts my experience. One example is the false dismissal of recollections that returning Vietnam veterans were sometimes greeted with condescension. Some regular blog readers may now better understand why I often quote Yale History and Religious Studies professor Carlos Eire as follows:

Show me history untouched by memories and you show me lies. . . Show me lies not based on memories and you show me the worst lies of all.

As a child in 1960, Professor Eire refugeed from Castro’s Cuba. He later wrote Waiting for Snow in Havana as a memoir to disclose what the Castro regime was really like because “many intellectuals, journalists and educated [Americans] fell for [Fidel’s] myth” that he was leading a well-intentioned utopian revolution. The dictator relied on the gullible hunger among our elite classes for myths and heroes. When he last spoke to the United Nations Newsweek headlined that Castro was “The Hottest Ticket in Town.” But Professor Eire remembers Castro as a tyrant to his own people.

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Presently, Americans are experiencing a tariff debate that echoes the sectional disputes of the antebellum, and much of the postbellum, years. Today, China responded to President Trump’s recent tariff hikes for steel and aluminum by threatening tariffs on leading imports from America. One example is soybeans, which is mostly used as feed for cattle.

Presently the Upper Mississippi Valley grows most of America’s soybeans. Illinois is the top producing state with about fifteen percent of our nation’s total. Moreover, almost half of America’s soybeans are exported. Last year the USA accounted for about ninety percent of China’s soybean imports and China bought about eighty percent of our soybean exports. In addition to putting a tariff on American soybeans, the Chinese are planning to buy more beans from other countries such as Brazil.

Thus, midwestern soybean farmers don’t oppose the aluminum and steel tariffs merely because the duties make aluminum and steel products more expensive. They are more worried that China’s retaliatory response will prompt a slash in export sales. China’s reciprocal tariffs will make American soybeans more expensive for Chinese importers who will thereby be incentivized to buy soybeans from other countries.

To put this in the context of the Civil War consider the following points. First, on the eve of the Civil War the South accounted for about eighty-percent of America’s exports. Second, about eighty-percent of America’s cotton was exported. Third, American cotton accounted for about ninety percent of Great Britain’s cotton imports. Thus, the South was far more dependent upon export-friendly tariff policies than any other section of the country. And it was also much more dependent upon such policies than America’s top soybean-producing region is presently.

Nonetheless, most modern historians dismiss the tariff as a cause of the Civil War. They note that tariffs taxed all consumers, not merely those in the South. But the argument ignores the point that higher tariffs incentivized the British to buy cotton from countries other than America. This is so because the British needed to be able to sell manufactured goods in the USA in order to earn the exchange credits required to buy cotton. High tariffs designed to protect the North’s manufacturing industries made it difficult for Britain to sell manufactured goods into America. Britain remained dependent upon Southern cotton only as long as the region remained the low cost producer. Southern attempts to retain a cost advantage led to nearly a century of peonage for white and black sharecroppers well into the twentieth century.

In one of his last acts as a Lame Duck President shortly before Lincoln took office, James Buchanan signed the Morrill Tariff Bill to increase duty rates and broaden the list of applicable items. Soon thereafter when Augustus Belmont—for whom The Belmont Stakes is named—tried to encourage the United Kingdom to back the federal Union during the Civil War, British Prime Minister Lord Palmerston replied, “It is true that we don’t like slavery, but we want cotton and we dislike your Morrill tariff.”

Finally, the South’s economy remained export-based, and therefore injured by tariffs, far into the twentieth century. Nonetheless, dutiable rates averaged 45% for fifty years after the war as compared to 19% at the start of the war. Consequently, the South’s export economy continued to be penalized as it was trying to rebuild after the war.

Sectional Tariff Differences

(March 13, 2018) Since President Trump put tariffs back in the news for the first time in decades it is hard to avoid noticing critics who walk the same halls as academic historians that dismiss tariffs as a cause of the Civil War.  Purdue’s Professor Wally Tyner, for example, notes that many Indiana manufactures export machinery made from steel to overseas markets and would be hurt by higher steel prices.

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At least Indiana has the consolation of also benefiting  because she is presently America’s top steel producing state. Imagine how Dr. Tyner might have objected if he was a Southerner the year before the Civil War. At that time the region accounted for eighty percent of all U. S. exports and produced hardly any goods that benefitted from tariffs. Presumably he would have been pleased that the Confederate constitution outlawed protective tariffs. While it allowed for minimal tariffs to raise revenue it prohibited any designed to protect any domestic industry from overseas competition.

As the table above documents, only about five percent of Southern congressmen voted in favor of higher tariffs for about forty years before the Civil War. Similarly, only eleven percent of the region’s senators voted to hike tariffs during the same period. Thus, tariffs were a persistent and clear sectional difference that should not be minimized as is currently popular among most historians.

The table also illustrates that the western states held the decisive votes on tariffs. Northerners could basically buy western votes by promising to spend the tariff money on public works—then termed “internal improvements”—that would economically benefit the western states. Such expenditures gradually shifted the western region’s axis of commerce from North-South via the Mississippi River to East-West via the Great Lakes, canals and railroads.

Almost forty years before the Civil War, South Carolina Senator William Smith succinctly explained Southern opposition to internal improvements. It was not, as some critics suggest, a desire to retard progress. Instead it was opposition to tariffs for much the same reason that most economists today object: “Destroy the tariff and you will leave no means of carrying on internal improvements; destroy internal improvements and you leave no motive for the tariff.” Due to the linkage to tariffs, the South felt that public works spending should be responsibility of the individual states. It was basically an endorsement of the state’s rights doctrine, which is a connection that most modern historians fail to discern. 

New Life in Tariff Argument

(March 9, 2018) Many of today’s historians are frustrated that they cannot eradicate the “myth” that sectional differences over tariffs even secondarily contributed to the Civil War. They like to label tariffs as “The Great Civil War Lie” and insist that slavery was the solitary cause of the war. Yet the strong opposition to President Trump’s recent shift in American tariff policy suggests that they should reevaluate one their key arguments.

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Specifically, they argue that Southerners had no reason to object to tariff hikes on the eve of the Civil War because rates had steadily declined over the previous fifteen years and were the lowest in at least forty years. As the table below shows, the tariff on dutiable items dropped from thirty-five percent in 1846 to nineteen percent in 1861, translating to a decline of about fifty-five percent.

But current loud objections to President Trump’s initiative suggests that tariff opponents will fight against higher rates even if they have been dropping for years. The table above shows that modern-era American tariffs have been declining since the end of World War II. Specifically, rates on dutiable items dropped from thirty-two percent in 1947 to about five percent currently, translating to a decrease of about eighty-five percent.

Although slavery may have been the leading cause of North-South differences, tariff policy was at least a secondary one. For example, even as the Confederate constitution legalized slavery it also outlawed protective tariffs. In order to sharply increase rates, in 1860 the U. S. House of Representatives passed the Morrill Tariff seven months before any Southern state seceded. The Senate passed it less than a year later after the initial seven Southern states formed the Confederacy. (The senators would likely have passed it within a matter of months anyway because new Republican senators had been elected and would soon take their seats.) Every Republican senator voted for the tariff. Thereafter rates on dutiable items averaged forty-five percent until the Republicans lost the White House to Woodrow Wilson in 1913. Wilson cut rates to a low of eighteen percent but Republicans increased them again to a high of almost sixty-percent in 1932.

From the end of the Civil War to the end of World War II, Republicans generally kept tariffs high in order to protect Northern industry from overseas competition at the expense of the South’s export economy. Southerners of the era consistently opposed high tariffs—as did their antebellum ancestors—for two reasons.

First, protective tariffs artificially inflated the cost of Northern manufactured goods as well as competitive goods from overseas. Second, such tariffs made it hard for European industrial economies to earn the American exchange credits needed to buy Southern cotton thereby giving the Europeans an incentive to buy cotton from other countries. Since half of the South’s cotton was purchased in Europe as late as 1940 America’s protective tariffs were a provocation to the South’s biggest customer for a long time.