Most Civil War and Reconstruction Era historians dismiss Southern complaints about tariffs, both as a cause of the War and of postbellum Southern poverty. They contend that the only impact of the tariffs was to raise the price of domestic goods protected by such tariffs. The price inflation, they argue, affected all Americans, not just Southerners. Although most concede that the domestic producers protected by such tariffs were chiefly north and west of the Mason-Dixon Line and the Ohio River, few explain how protective tariffs were injurious to the South’s export economy.
On the eve of the Civil War cotton and tobacco alone accounted for two-thirds of America’s aggregate $316 million in exports, with cotton representing 92% of the two-thirds. Eight years after the Civil War ended, cotton and tobacco represented half of all USA exports with cotton accounting for 90% of the half. As late as the 1930s most of America’s cotton continued to be sold overseas.
During the nineteenth century Great Britain was America’s prime trading partner. They typically sold us manufactured goods, which we paid for by selling them cotton and tobacco exports. Shortly after the Civil War started America raised her average tariff on dutiable items to 45% and held them there for fifty years.
Most historians correctly teach that the 45% tariff protected domestic (mostly Northern) manufacturers from overseas price competition. Few, however, teach that the tariffs also depressed the prices for American commodity exports. The following simplified and hypothetical transactions explain how:
Assume that Britain sends $300 million in manufactured goods to America in one massive fleet. If there is no tariff, the shipper (Great Britain) collects $300 million in proceeds by selling their goods to Americans. The shipper thereby has $300 million in US currency with which to buy American exports.
Next, consider the same transaction with a 45% import tariff. Instead of collecting $300 million the shipper must pay $135 million (45%) of the sales proceeds to our Federal Government as an import tax. Thereafter he has only $165 million in American currency with which to buy USA exports. To buy the same quantity of American exports as in a tariff-free environment, he must reduce his bid price to the American sellers by 45%. Since Southern farmers were consistently such sellers well into the twentieth century, they were forced to accept prices far below what a tariff-free market would yield.
In short, Southerners not only had to pay the same inflated prices for Northern-made manufactured goods protected by tariffs from overseas competition as did all Americans, but they also had to accept steeply lower prices for their export products. (The quantity sold could alternatively be reduced, but the financial impact would be the same: a 45% reduction in the proceeds to Southern farmers and other exporters.)
In sum, tariffs imposed a regionally discriminatory penalty, that kept the South poor for almost a century after the Civil War had ended. Regions, like the North, that chiefly produced goods for domestic consumption mostly avoided the penalty.