The Founders Would Be Appalled by Trump’s Tariff Policy—Even Hamilton

Tariffs aren’t just economic tools—they’re a test of America’s constitutional limits.

By Iain Murray of the Competitive Enterprise Institute. Excerpts:

"the founders warned that emergencies provide dangerous pretexts for executive overreach. The Federalist warned in various places that, while powers to deal with crises were necessary, they must be subject to checks and balances like all other executive powers.  So, Congress must control the purse and, alongside the judiciary, guard against executive abuse of emergency power. 

Power of the purse is central to a second aspect the Founders warned about – the Executive must not have the power to tax. That is squarely a Congressional duty to reflect the consent of the governed to taxation (the President, though elected, is more remote from the people.) Nor did the Founders think a tariff was something different from a tax, as some of the President’s supporters maintain. In Federalist 35, for instance, Alexander Hamilton asks what if the power to tax was constrained to import duties (as some anti-federalists were demanding), plainly viewing tariffs as a subset of taxation powers. 

The corollary of this is that the President can have no separate source of revenue from that directed by Congress. In Federalist 58, Madison states clearly, “The House of Representatives cannot only refuse, but they alone can propose the supplies requisite for the support of government.” The idea of a President directing a sovereign wealth fund with monies provided by foreign governments falls manifestly outside this constitutional design. 

Indeed, the Founders were worried about Presidential patronage power in general. They constrained the President’s appointment power with the consent of the Senate and, as Madison said in Federalist 48, “The legislative department alone has access to the pockets of the people,” thereby dissuading “projects of usurpation” by the Executive in this way. 

Congressional silence on the President gaining control over a foreign-funded trillion-dollar fund to dispense patronage would be exactly the sort of thing Madison warned about when he said “a mere demarcation on parchment of the constitutional limits of the several departments, is not a sufficient guard against those encroachments which lead to a tyrannical concentration of all the powers of government in the same hands.” 

A President declaring a “national emergency” over a trade imbalance or overcapacity in foreign markets, leading to his imposing taxes on Americans without Congressional deliberation or scrutiny, and possibly gifting him a massive pool of funds he could use for patronage, is exactly the sort of thing the Constitution was designed to prevent. It violates the separation of powers, eludes democratic accountability, and fits the pattern of emergency overreach our Founders repeatedly warned against throughout the constitutional debates. Even the biggest fan of an energetic executive, Alexander Hamilton, wanted to make sure that most of these powers remained firmly under Congressional control. 

Indeed, Hamilton, supposedly the father figure of American protectionism, made many of the same arguments that free market economists make today about the abuse of tariffs as a revenue source. In the aforementioned Federalist 35, Hamilton says explicitly that “the consumer is the payer,” recognizing that the tax burden falls not on the foreign exporter, but on the American consumer. Indeed, this is why he recognizes that tariffs cannot be the only source of revenue for the federal government, as their burden would fall inequitably on the poor. 

Hamilton recognized the problem of dispersed costs of tariffs — while they may initially seem painless because consumers don’t see the tax obviously, the total cost can become “oppressive.” In other words, tariffs are regressive. They are also therefore self-limiting, deterring imports, and thereby further revenue, when set too high. This provides another reason for the power to tariff to be confined to the legislature, which, as the people’s representative, can quickly respond to economic problems affecting specific sectors.

One final point is worth making about Hamilton. In the “Report on Manufactures,” the ur-text of American protectionism, the tariffs Hamilton proposed were modest by comparison with the President’s proposals, perhaps in consideration of the points he had made during the ratification debates. Indeed, the Report suggests that in many cases subsidies (or “bounties”) were preferable to tariffs as a means of encouraging industries, although Hamilton admits they may become the object of corruption, making it “necessary to guard, with extraordinary circumspection, the manner of dispensing them.” The President’s trade policy goes well beyond any of this. As Samuel Gregg has argued, the Founders wanted America to be a commercial republic. The President’s tariffs and the manner in which they have been used suggest not only a hostility to commercial trade, but to a republic with an executive constrained by co-equal powers. Congress, so far, has failed to guard its privileges. The Courts may not be so quiescent."