Nationalist/populist conservatives, including the Republican nominee, claim that US economic history supports their views of trade protectionism. Donald Trump says “tariff” is “the most beautiful word in the dictionary” and that America “in the 1890s was probably the wealthiest it ever was” because of its tariff system.

First, per capita GDP is, conservatively, seven times higher today than in 1900. That Trumpian flourish aside, pro-tariff views are an outlier among economists, who are overwhelmingly skeptical of trade protectionism. That’s certainly the message from Chicago Booth surveys of economists over the years. Last April, for instance, 79 percent (weighted by confidence) disagreed with the notion that “gains for the US economy from tripling the tariffs on Chinese steel and aluminum products “would measurably outweigh the losses.” Back in 2012, 96 percent (weighted by confidence) agreed that the productivity and choice benefits of freer trade are much larger than employment effects.

And here is a bit from my 2018 podcast chat with Douglas A. Irwin, trade economist at Dartmouth College on those late 19th-century tariffs specifically: 

A lot of people will say, you know, we grew very rapidly in the late 19th century. We industrialized as a country and we had high tariffs and ergo the tariffs are responsible for those good times and therefore we should go back to that. You hear that from Pat Buchanan and probably Steve Bannon and maybe even the president himself. But when you look at that era actually in the late 19th century the US was very open. We were open for immigration and we indeed had massive immigration. We were open to capital from the rest of the world and were able to borrow and purchase a lot of technology. So it’s not as though we were an isolationist country with big barriers. Yes, we did have fairly stiff tariffs on imported manufactured goods, but otherwise we were very open to what was going on in the world economy.

In fact immigration, as I point out in the book, was actually a key instigator in terms of the development of many manufacturing industries in the United States. So we’ve never really had a period in US history when we’ve been closed to both trade and immigration.

In addition, it’s become very hard actually to attribute US economic growth in the late 19th century to those higher tariffs. A lot of the key improvements in technology and a lot of the growth was in the service sector: telecommunications, railroads, and things of that sort. Manufacturing really didn’t grow much as a share of GDP in the late 19th century. A lot of that grew actually in the pre-Civil War period when tariffs were actually much lower — only in the range of 20 percent or so.

So there is the simplistic argument that one encounters a lot — that tariffs allowed us to grow rapidly in the late 19th century — but the more you look into it you see it’s a really tough case to make. A lot of other factors were involved and the tariffs were probably third or fourth order. And it’s not even clear they had a positive impact as opposed to a negative impact.

Now there’s a new study that further refutes the supposed connection between tariffs and America becoming a prosperous industrial superpower. In the new NBER working paper “Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age,” economists Alexander Klein (University of Sussex Business School) and Christopher M. Meissner (University of California, Davis) matched detailed tariff data from 8,300 products with state-level manufacturing records from 1870-1909, using price changes and specific tariff rates to measure how trade protection affected industrial performance. 

Klein and Meissener found that while America did become a global manufacturing powerhouse during the period studied, the evidence suggests this happened despite, not because of, protective tariffs that averaged 35 percent. High tariffs actually reduced manufacturing productivity in most industries. And when tariffs decreased, labor productivity jumped significantly.

For example: Despite enjoying hefty tariff protection of as high as 70 percent from products, American textile manufacturers remained unable to compete with European firms in high-quality products. Instead, tariffs allowed them to survive while focusing on lower-quality, less efficient production. It was the same story throughout the US economy. Economists would also not be surprised that tariff policy was driven by industry lobbying, not some deeply considered industrial strategy.

The papers’ kicker:

[We] can, with great certainty, rule out the idea that high tariffs played a strong role in boosting labor productivity in American manufacturing. American productivity leadership, emblematic of this period, was almost certainly not a function of US trade policy and tariffs.