Alexander Hamilton, the Other Tariff Man Who Created a Mess

One of the many unsettling features of Donald Trump is his deep-seated antipathy to the time-honored doctrine of free trade. Even as early as 2016, Trump devoted a substantial portion of his Republican Convention speech calling for the adoption of protectionist tariffs and other trade restrictions against “any country that cheats.”

He proceeded to blame NAFTA for a litany of largely-imagined economic woes in the industrial sector; reiterated his support for an import-substitution regime to internalize manufacturing and tech production in the United States; likened the trade deficit to the federal budget deficit; and railed incoherently against that favorite modern-era scapegoat of all of America’s purported trade ills, China.

In the following years, Trump only doubled down on his calls for alleged economic autonomy,  threatening to take the United States out of the World Trade Organization, imposing vast tariffs against any country with whom the US runs a “trade deficit,” threatening more tariffs as a political bludgeon, daily introducing more uncertainty about the rules in a way that has made business cautious to invest.

Protectionists are not new to American politics, though they do buck the trend toward a managed but certain trade liberalization, advanced by both major parties over the past eighty years. In his own idiosyncratic and sometimes vulgarized way, Trump represents the resurgence of an economic philosophy as old as the republic itself: that of Alexander Hamilton.

Hamilton’s “Fortress America” Economic Policy

A skilled, if often mistaken, political commentator in his own right, Hamilton was the father of the direct antecedents to Donald Trump’s favored economic system. Over the course of almost 30 years in political life, Hamilton developed a program of sometimes nuanced but assertive economic nationalism. He believed that trade restrictions were crucial to the development of the fledgling nation’s “infant” industrial base, as well as a guardian against practices of European nations that he deemed unfair or harmful to American interests.

To attain this result, Hamilton advocated a complex and carefully tuned system of “bounties” (essentially, subsidies to boost American companies against their competitors abroad) and protective tariffs to insulate American industries from foreign competition. Hamilton and his political heirs coupled this prescription with an aggressive program of harbor, canal, and road infrastructure spending, often called “internal improvements.”

These public works projects would in turn provide the means to transport American-made products to American consumers, thereby bypassing the alleged “dependency” on Europe for manufactured imports. As an added bonus, their construction would supply American workers with jobs and industry in its own right.

Hamilton’s Plan to Make America “Grand and Glorious” Again

The parallels to Trump’s agenda are no accident. To quote the great classical liberal economist William Graham Sumner, Hamilton’s mind was “completely befogged in the mists of mercantilism.” This affliction lasted from his earliest forays into politics as a young soldier in the revolutionary army until his most famous economic treatise, the deeply protectionist “Report on Manufactures,” that he wrote as Secretary of the Treasury in 1791. To Hamilton, economic “autonomy” — maintained through an extensive system of state regulations and economic management — was a primary feature of the American experiment.

“Food and clothing we have within ourselves,” he wrote in 1774. The rest could be cultivated with a policy of forced economic independence. Hamilton continued:

Our climate produces cotton, wool, flax, and hemp; which, with proper cultivation, would furnish us with summer apparel in abundance… We have sheep, which, with due care in improving and increasing them, would soon yield a sufficiency of wool… 

It would be no unbecoming employment for our daughters to provide silks of their own country. The silk-worm answers as well here as in any part of the world. Those hands which may be deprived of business by the cessation of commerce, may be occupied in various kinds of manufactures and other internal improvements.

If, by the necessity of the thing, manufactures should once be established, and take root among us, they will pave the way still more to the future grandeur and glory of America; and, by lessening its need of external commerce, will render it still securer against the encroachments of tyranny.

Trumpilton Trade: Winners vs. Losers, Cheaters vs. Suckers

This aggressively autarkic pronouncement gave way to greater nuance as Hamilton’s politics matured, but protectionism always remained a constant feature of his message. In 1782, he pressed its strategic propriety in a blistering assault on the national government’s lack of regulatory powers under the Articles of Confederation.

“To preserve the balance of trade in favor of a nation ought to be a leading aim of its policy,” Hamilton declared. “The avarice of individuals may frequently find its account in pursuing channels of traffic prejudicial to that balance, to which the government may be able to oppose effectual impediments.”

Trade regulation, to Hamilton, was the essence of economic policy. Free trade, he complained, stood “contrary to the uniform practice and sense of the most enlightened nations.” Rather, commerce must be subject to “the encouragements or restraints of government.” The “power of regulating trade ought to have been a principal object of the Confederation,” he continued, laying out the case for a national authority to regulate commerce that would come to pass under the new Constitution of 1787.

Hamilton’s 1791 Report turned these sentiments into prescriptive policies. Deeming foreign demand for American agricultural products “too uncertain a reliance” for the fledgling nation, he called for the use of economic regulations, tariffs, and bounties to create “a substitute for it, in an extensive domestic market.”

The reason for these policies, according to Hamilton, was an allegedly unfair playing field abroad. “If the system of perfect liberty to industry and commerce were the prevailing system of nations,” he argued, free trade would have merit. “But the system which has been mentioned, is far from characterising the general policy of Nations. The prevalent one has been regulated by an opposite spirit.”

Echoing Hamilton, Trump advanced a boorish but conceptually identical argument in the March 10, 2016 Republican debate: “Take China as an example. I have many friends, great manufacturers, they want to go into China. They can’t. China won’t let them. We talk about free trade. It’s not tree free trade; it’s stupid trade. China dumps everything that they have over here. No tax, no anything.”

Who Could Be against “Improvements”?

To complement his managerial approach to international trade and domestic industry development, Hamilton also used the 1791 report to propose a national infrastructure plan. “Improvements” favoring the transportation of goods, he argued, were an object of any government. In this area, “The United States stand much in need.” He continued:

The symptoms of attention to the improvement of inland navigation which have lately appeared in some quarters, must fill with pleasure every breast, warmed with a true zeal for the prosperity of the country. These examples, it is to be hoped, will stimulate the exertions of the Government and citizens of every State.

There can certainly be no object more worthy of the cares of the local administrations; and it were to be wished that there was no doubt of the power of the National Government to lend its direct aid on a comprehensive plan. This is one of those improvements which could be prosecuted with more efficacy by the whole, than by any part or parts of the Union.

If these features sound familiar, consider the following line from Trump’s acceptance speech: “This new wealth will improve the quality of life for all Americans — we will build the roads, highways, bridges, tunnels, airports, and the railways of tomorrow. This, in turn, will create millions more jobs.”

It is more or less the same argument, updated by about 200 years of technological advance and distilled into the bombastic platitudes of an idiot.

Pro-Immigration — in Theory

If Trump’s trade protectionism is essentially less coherent Hamiltonianism, what about its close cousin in immigration? Trump has infamously appealed to the nativist tendencies of American populism, ranging from his proposal to build a massive wall on the American border with Mexico to a range of notorious “security” deportations and immigration restrictions, in the name of fighting crime and terrorism.

Alexander Hamilton was, famously, an immigrant himself. He also diverged from Trump in his pairing of immigration and protectionism. The 1791 Report contained an extensive defense of “promoting of emigration from foreign Countries” and linking this policy to his broader program for the state promotion of manufactured goods.

Though he struck liberal policy tones on immigration for his day, Hamilton’s immigration views were not without nuance, and an uglier side emerged toward the end of his life. Hamilton proved quite capable of espousing openly xenophobic and nativist beliefs, often to the surprise of his contemporaries who knew of his own birth on the Caribbean island of Nevis.

One striking episode came to print in 1796, involving a dispute between Hamilton and William Findley, a congressman from western Pennsylvania who had harshly criticized Hamilton’s role as Secretary of the Treasury in instigating the Whiskey Rebellion.

Addressing the Irish-born Findley and Swiss-born politician Albert Gallatin, Hamilton “censured the people [of Pennsylvania] for electing us.” According to Findley’s recollection:

[Hamilton] expressed much surprise and indignation at their reposing so much confidence in foreigners, that Gallatin and I were both foreigners and therefore not to be trusted.

When it was answered, that I had been in the country from my youth, &c. and that Mr. Gallatin had come into it very young and had been a citizen a competent length of time, to be legally qualified for trust, that we were both sensible men, and had a sufficient stake in the country, to secure our interest, he persisted in saying, that we were bad hearted men and dishonest politicians.

Perhaps “foreigners are bad hearted men” was 18th century shorthand for “the Mexicans are sending us drugs dealers, criminals, and rapists.”

Trump’s Dream: The Alien and Sedition Acts

Hamilton also served as something of a behind-the-scenes cheerleader of perhaps the most severe anti-immigration policy to emerge during the founding era, the legislative package known as the Alien and Sedition Acts of 1798. This set of four bills is best known today for its penalization of “sedition” — the criminalization of certain forms of political speech that the Federalist Party used to persecute opposing newspaper editors.

The legislative package’s other three less-discussed provisions actually pertained to immigration:

– The Naturalization Act of 1798 increased the required residency period for an immigrant to obtain naturalized citizenship from 5 to 14 years.

–  The Alien Enemies Act authorized the imprisonment or forcible deportation of non-citizen males coming from any country with which the United States was in a state of declared war (note that this provision extended to persons who would have also lost their citizenship eligibility under the Naturalization Act).

–  The Alien Friends Act granted the president wide authority in times of peace to order the detention or deportation of foreign nationals that were deemed “hostile” to the United States, and to prescribe severe restrictions on the durations that targeted persons could remain in the country.

These draconian measures came into being as a product of early anti-immigrant sentiments tied to the undeclared Quasi-War with France, which Hamilton played a key role in fomenting. The Quasi-War itself was an outgrowth of the French Revolution, entangling the United States in a state of degrading diplomatic and eventually naval relations with a succession of governing regimes in France.

As Hamilton’s political adversaries, the Democratic-Republicans, had expressed early sympathies for the French Revolution, the episode also functioned as a prime opportunity for the Federalists to whip the American public into a state of alarm about the presence of alleged subversives and other “treasonous” elements who supposedly threatened to import a Jacobin “Reign of Terror” into the fledgling United States.

In reality, the Federalists’ driving motivator was likely a combination of (1) a ploy to strengthen the case for war with France, and with it the establishment of a “defensive” army under Hamilton’s command, and (2) an old-fashioned ballot suppression scheme to disenfranchise immigrants, who tended to vote for the opposition Democratic-Republicans.

Hamilton followed the bills’ progress through Congress closely. While his role in their drafting is confounded by the destruction of Hamilton’s personal papers — and a disputed assignment of blame to him by Hamilton’s bitter enemy, President John Adams — there can be little doubt that he approved of the anti-immigration measures.

As Congress debated the bills, he wrote Secretary of State Timothy Pickering for information about their progress. Hamilton informed Pickering of his opinion that “the mass [of Aliens] ought to be obliged to leave the Country,” though he wished for Congress to carve out exceptions for persons “whose situations would expose them too much if sent away & whose demeanour among us has been unexceptionable,” and he asked that their enforcement “not be cruel or violent.”

Nonetheless, his position was clear. Hamilton supported deporting foreigners on suspicion of threat to the United States, which in his own time entailed the publicly inflamed specter of Jacobin revolutionaries in France. It is not difficult to see the parallel “national security” rationale for the Alien Acts of 1798 and Donald Trump’s own vulgar plan for banning Muslims from entering the country.

The Long Shadow of Hamilton

Most of the alien and immigration restrictions were quickly repealed after the Federalists fell from power in 1800, though they served as an unsettling precedent for subsequent anti-immigration measures across American history. The Alien Enemies Act remained on the books however, and provided an important legal pretext for more aggressive measures enacted under the Espionage Act of 1917.

Since then, economists have also debunked the reasoning behind Hamilton’s neo-mercantilist economic system, but its popular appeal has persistently lingered over American politics. Hamiltonian ideas directly sustained a trade-penalizing protectionist regime into the early 20th century.

Unfortunately Donald Trump has reinvigorated one of America’s oldest and most dubious political traditions, and this time it’s coming with all the reckless ambition of its founder, but none of his intellectual sophistication or erudition.


Phillip W. Magness


Phil Magness is a Senior Research Fellow at the American Institute for Economic Research. He is the author of numerous works on economic history, taxation, economic inequality, the history of slavery, and education policy in the United States.
This article is republished with permission from the American Institute for Economic Research.

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