Personal Finance
How the U.S. has used tariffs through history — and why Trump is different
Shipping containers are seen at the Port of Montreal in Montreal, Canada, on Feb. 3, 2025.
Andrej Ivanov | Afp | Getty Images
President Donald Trump imposed broad tariffs on China on Tuesday, while tariff threats hang over other major trading partners like Canada, the European Union and Mexico.
That may lead some to wonder: How have tariffs been wielded through U.S. history, and is Trump unique in his use of them?
The ‘three Rs’ of tariffs
The U.S. has used tariffs since its founding in the 18th century.
In fact, the Tariff Act of 1789 was among the first bills ever passed by Congress.
Since then, the U.S. has used tariffs to achieve three broad goals, said Douglas Irwin, an economics professor at Dartmouth College and past president of the Economic History Association.
Irwin calls them the “three Rs” — revenue, restriction (import barriers to protect domestic industry) and reciprocity (a bargaining chip to cut deals with other countries).
Using tariffs for revenue
Tariffs are taxes on U.S. imports, paid by the entity that’s importing the foreign good. Those taxes raise revenue to help fund the federal government.
For roughly the first third of the nation’s history — from its founding until the Civil War — the revenue motivation was “paramount” as a driver to impose import duties, Irwin said. The federal government relied on tariffs for about 90% or more of its revenue during that period, he said.
But things changed after the Civil War, Irwin said. The U.S. started to impose other taxes, like excise taxes, that made the nation less reliant on tariffs.
Tariffs generated about half of federal revenue from about 1860 to 1913, when the income tax was created, Irwin said.
The scale of the government expanded significantly in the 1930s — with the creation of New Deal programs like Social Security — and later for defense spending during WWII and the Cold War, said Kris James Mitchener, an economics professor at Santa Clara University who studies economic history and political economy.
Today, “tariffs simply cannot raise enough revenue to fund government expenditure,” Mitchener said. “There’s no possible way you could support the size of the U.S. military on tariff revenue.”
Restriction and reciprocity
From the Civil War to the Great Depression, the U.S. primarily used tariffs as a restrictive measure on imports, to insulate the domestic market from foreign competition, Irwin said.
For example, the Tariff Act of 1930, popularly known as the Smoot-Hawley Tariff, levied protective tariffs on roughly 800 to 900 different types of goods, accounting for about 25% of all goods imported to the U.S., Mitchener said.
Then, the post-Depression era — especially the post-World War II period — ushered in an era of “reciprocity,” Irwin said.
The U.S. helped create the General Agreement on Tariffs and Trade in 1948, the precursor to the World Trade Organization, which set global rules for trade and ushered in an era of low tariffs.
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That said, the U.S. also used tariffs as a reciprocal bargaining chip before WWII.
For example, before the U.S. annexed Hawaii, it signed a free-trade agreement with the Kingdom of Hawaii in 1875. The treaty allowed for duty-free imports of Hawaiian sugar and other agricultural products into the U.S. In exchange, the U.S. got exclusive access to the harbor that would later be known as Pearl Harbor.
How the president’s tariff power grew
U.S. import taxes before the WWII era were pretty high, ranging from 20% to 50%, sometimes even reaching 60%, Irwin said. They have been “very low” since 1950 or so, he said.
The average duty on goods subject to a tariff was about 2% to 4% in the 2010s before Trump’s first term, Mitchener said.
“That’s what President Trump is trying to overturn, this sort of low period of tariffs we’ve had since World War II,” Irwin said.
Before 1934, it was Congress — not presidents — that had power over tariff rates and negotiations, said Andrew Wender Cohen, a history professor at Syracuse University.
But Democrats — then known as the political party of free trade — had an enormous majority around the New Deal era and passed the Reciprocal Trade Agreements Act of 1934, granting the president the right to negotiate tariffs in certain cases, Cohen said.
“That’s when the president gains a much more substantial authority,” Cohen said.
That power accelerated after 1948 during the “transformation of the whole global economic order,” he said.
Why Trump tariff policy is ‘very unusual,’ economists say
President Donald Trump in the Oval Office of the White House on Feb. 03, 2025.
Anna Moneymaker | Getty Images News | Getty Images
That said, Trump’s use of tariff policy is “very unusual” among modern U.S. presidents, Cohen said.
For one, Trump “likes all three Rs” — revenue, restriction and reciprocity, Irwin said.
For example, on the campaign trail, he suggested that tariffs could replace the U.S. income tax to fund the government. He said during his campaign that they would create U.S. factory jobs and has threatened to use them to strongarm Denmark to give up Greenland.
However, there are tradeoffs, Irwin said. For example, restricting imports somewhat negates tariffs’ ability to raise revenue, because it diminishes the tax base for tariffs, he said. (Those additional duties may cause companies to import less or push people to buy less, for instance.)
“You can’t really achieve all three objectives at same time,” he said.
Additionally, no previous president has tried to link a U.S. drug crisis to trade policy, as Trump did with fentanyl.
“That’s a novel take,” Mitchener said.
Many presidents have used tariffs. For example, George W. Bush, Ronald Reagan and Richard Nixon applied tariffs to protect the U.S. steel industry, as Trump did in his first term, Irwin said.
“What’s unusual about Trump is, he’s not just picking out particular industries that he thinks are of strategic importance, but he’s blocking imports across the board almost with some of these countries,” Irwin said.
Trump imposed a 10% additional tariff on all Chinese goods, for example, and threatened a 25% tariff on imports from Canada and Mexico.
“No president in recent memory has really used tariffs across the board or in a broad-brush way to achieve various objectives,” Irwin said. “They’ve sort of adhered to the rule that we belong to the WTO. That means we keep our tariffs low as long as other countries keep their tariffs low.”
Cohen agreed.
Global trade treaties, like the United States-Mexico-Canada Agreement (USMCA) Trump signed in his first term, establish a mechanism for nations to file grievances for alleged unfair trade practices, Cohen said. Nations can generally raise tariffs as a retaliatory measure if trade rules are breached, per the treaty terms, he said.
Trump’s recent unilateral tariff announcements are unique in this regard, he said.
“I can’t think of any precedent for that,” Cohen said.
“While the executive branch was given much more power since 1934, it’s always been subject to the specific terms of the agreements,” he said.
Images By Tang Ming Tung | Digitalvision | Getty Images
Tax identity theft remains a ‘serious problem’
One key reason to file your return early is to avoid tax identity theft, experts say. By filing sooner, you can block thieves from using your Social Security number to file a fraudulent return, Brewer said.
Tax-related identity theft continues to be a “serious problem,” with many victims facing processing and refund delays, National Taxpayer Advocate Erin Collins wrote in her January report to Congress.
At the end of fiscal year 2024, the average processing time to resolve identity theft victim assistance cases was more than 22 months, up from 19 months the previous year, Collins reported.
For the 2024 filing season, the IRS confirmed more than 15,600 identity theft returns through Feb. 29, 2024, up from about 12,600 in 2023, according to a Treasury report issued on April 30.
‘Measure twice, cut once’
Whether you’re filing early because you’re eager for a refund or want to protect yourself from identity theft, you’ll still need a complete and accurate return to avoid delays, experts say.
While many tax forms come in January, others won’t arrive until mid-February to March or longer, according to the American Institute of Certified Public Accountants.
But once you have the necessary forms, “don’t be in a hurry to press ‘send,'” said Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.
You should always double-check key details like your name, Social Security number, banking information and other filing data. When it comes to return accuracy, aim to “measure twice, cut once,” he said.
IRS layoffs could impact service
With thousands of IRS layoffs this week, some experts worry the cuts could impact taxpayer service.
But your refund shouldn’t be affected if you file an accurate return electronically and select direct deposit for payment, O’Saben said.
Typically, you can expect the IRS to process your e-filed return within 21 days. “Corrections or extra review” could take longer, according to the agency.
“Barring a [system] crash, I would expect business as usual,” O’Saben said. “There shouldn’t be an issue meeting the timeline that the IRS lays out.”
Protesters demonstrate in support of federal workers outside of the U.S. Department of Health and Human Services on Feb. 14, 2025 in Washington, DC.
Anna Moneymaker | Getty Images
On Feb. 11, Elizabeth Aniskevich, an attorney at the Consumer Financial Protection Bureau, received a notice that she was being terminated immediately.
“I was completely shocked,” said Aniskevich, 39. She had been with the CFPB for nine months and imagined spending her entire career in the federal government.
“I didn’t expect it to unfold this way,” she said.
More than a week later, she’s still scrambling for basic answers. “There’s no information about what’s going on with my benefits, or what I need to do with unemployment,” Aniskevich said.
She’s worried about how she’ll pay the mortgage on her Washington, D.C., apartment after her emergency savings runs out in a few months.
“I’ve worked really hard to be financially stable,” Aniskevich said.
Elizabeth Aniskevich.
Courtesy: Elizabeth Aniskevich
Aniskevich is one of thousands of federal workers laid off by the new Trump administration in recent weeks and thrown into financial and career uncertainty. President Donald Trump and Elon Musk‘s secretive government-slashing effort, the Department of Government Efficiency or DOGE, are working to shrink the federal workforce.
Losing one’s job is always difficult. But the suddenness and speed of the firings, which have affected offices from the Environmental Protection Agency to the U.S. Department of Education, have left workers especially in the dark about their rights and next steps, experts said.
“Most people would have selected the public sector because it has a reputation of being a more stable work environment than the private sector,” said Don Moynihan, a public policy professor at the University of Michigan. “But in this case, that stability proved to be an illusion.”
CNBC spoke with financial advisors and policy experts to get answers to some of the many important questions terminated federal workers likely have right now.
Workers may be able to appeal, take legal action
The Trump administration and Musk’s DOGE have largely targeted workers on a probationary status for cuts.
That’s because probationary workers, who have typically been in their position for a year or less, have fewer protections after they’re removed than do career civil servants, said David Eric Lewis, a political science professor at Vanderbilt University.
For example, probationary workers might not meet the requirements to appeal their termination to the U.S. Merit Systems Protection Board. The board reviews cases in which federal workers were laid off or suspended.
Still, there are limited cases when they can appeal, experts said. You should speak to an employment lawyer or your union representative for more details, experts recommend.
The name and logo for the Consumer Financial Protection Bureau (CFPB) is seen scraped off the door of its building in Washington, D.C., U.S., Feb. 20, 2025.
Brian Snyder | Reuters
“They can also seek legal relief,” Lewis said. Your union may help you file your lawsuit in federal court, he added.
It can be more effective to bring your legal challenge as a group, with other terminated federal workers, Lewis said.
“That’s what is happening,” he said. “There’s a hope that there is at least a stop to these orders.”
A federal judge Thursday denied a bid by labor unions to block the mass layoffs across the federal workforce. The National Treasury Employees Union alongside four other groups filed a lawsuit against the firings on Feb. 12.
What to know about unemployment benefits
Federal workers can collect unemployment benefits through the Unemployment Compensation for Federal Employees (UCFE) program. Some government employees — including ex-military personnel discharged under honorable conditions and former members of the National Oceanographic and Atmospheric Administration — receive benefits through a separate program, known as the Unemployment Compensation for Ex-servicemembers (UCX).
The jobless benefits, which are supposed to arrive within two or three weeks after you apply for them, are nearly identical to those of private-sector workers, said Michele Evermore, senior fellow at the National Academy of Social Insurance.
States — as well as U.S. territories and the District of Columbia — administer the payments. Workers must submit an application with the appropriate workforce agency. You should apply in the state or district where your last official duty station was located, Evermore said.
Those working remotely on a full-time basis likely need to file a claim in their state of residence, Evermore said.
Workers should apply for unemployment as soon as possible, experts said. Delays are likely amid the purge of government workers.
Those claiming UCFE benefits will likely need to include certain documents with their claim, including a SF-8, or a Notice to Federal Employee About Unemployment Insurance, as well as a SF-50, or a Notification of Personnel Action, according to the U.S. Labor Department.
Those applying for UCX benefits should have a copy of their service and discharge documents — DD-214 or a similar form, the Labor Department said.
Federal employers are supposed to provide these forms to workers upon separation, but Aniskevich said the Consumer Financial Protection Bureau still hadn’t given her those documents as of Friday.
For now, she filed her unemployment application in Washington, D.C., without them.
“It’s stressful to have uncertainty about whether my claim can be processed given the lack of forms,” Aniskevich said.
Federal agencies appear to be citing lackluster performance as rationale for many job cuts in termination letters, experts said. Even so, workers should still apply for benefits, Evermore said. The cause must generally rise to the level of “gross misconduct” to prevent people from receiving aid.
This could delay benefits if the government contests a claim, however, experts said.
Health coverage for terminated workers
Meanwhile Chris, who worked as a transportation program specialist at the Federal Transit Administration, was laid off on February 14. Like Aniskevich, he was a probationary worker, and had been employed by the FTA for around nine months. (He requested to use his first name only, out of fear of retaliation from the Trump administration.)
Despite the financial stability usually associated with a federal job, he found himself with no protections.
“There was no severance pay,” said Chris, 33, who is based in the Los Angeles area.
Chris did learn that his health benefits will continue for 31 calendar days after Valentine’s Day.
Similarly, federal employees should try to determine the specific date their health coverage will end, experts said. While the timelines may vary, most probationary workers will need to find new health insurance soon.
Those who wish to continue with their current health care should look into the federal government’s Temporary Continuation of Coverage, experts say. Under this option, you’re able to extend your federal workplace plan for up to 18 months after termination. (It’s similar to COBRA, or the Consolidated Omnibus Budget Reconciliation Act, for private-sector workers.)
Keep in mind that, with TCC, you’ll be responsible for the full cost of your premiums, plus any administrative fees.
“It’s going to be [a] pretty big hike,” said Brennan Rhule, a Reston, Virginia-based certified financial planner who specializes in federal workers.
If the new premium cost is too high to shoulder under TCC, you may qualify for a special enrollment period of the Affordable Care Act marketplace, according to Kate Ende, leader of the policy team at the Consumers for Affordable Health Care, a nonprofit. The special enrollment period typically gives you 60 days to sign up for a marketplace plan after you lost your coverage.
Medicaid might also be an option, Ende said, and if you qualify you can enroll at any time for it.
Relief options for recurring bills
Federal workers concerned about staying current with their bills should reach out to their lenders and explain their situation, consumer advocates said.
For instance, contact your mortgage lender and ask about forbearance or deferment options, said John Breyault, vice president of public policy at the National Consumers League. If you’re a renter, landlords and property managers may offer temporary payment plans or deferments.
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Some auto lenders allow deferments, too, especially if you have a good payment track record. Meanwhile, your auto insurer may be able to adjust your coverage and lower your costs if you will no longer be driving long distances to work, Breyault said.
For utilities like electricity, water, gas, internet and phone service, see if your providers offer a grace period or deferred payments, Breyault said.
Those with student loan bills can request an unemployment deferment with their servicer.
Keep in mind that such concessions and breaks can be helpful in the near-term, but read the terms thoroughly. There could be long-term costs associated, such as interest continuing to accrue or other fees.
Watch out for ‘undoable’ retirement account missteps
Federal workers who find themselves unexpectedly out of work may be tempted to take money from their retirement plans. However, experts emphasize it is important to know the ins and outs of each plan’s rules to avoid unexpected costs.
“Before you do anything, make sure you talk to somebody who understands and can guide you,” said CFP Mark Keen, who is a federal benefits expert with the National Active and Retired Federal Employees Association.
“Make sure that you don’t make any mistakes that are undoable,” said Keen, who is also a partner at Keen & Pocock.
Federal workers generally have access to a pension through the Federal Employee Retirement System, or FERS, and to a defined contribution savings plan, known as the Thrift Savings Plan, or TSP.
FERS provides a guaranteed income stream once a worker reaches a certain age, a perk that’s mostly unavailable in the private sector, Keen said.
Federal workers may withdraw their FERS contributions if they leave federal employment, but that may not be the best choice. It will take a while to build your pension back up if you return to federal service, said Katelyn Murray, a chartered federal employee benefits consultant and director of relationship management at Serving Those Who Serve.
If you leave the balance intact, you retain the years of service you’ve accumulated, Murray said. Having a FERS pension also allows retirees to continue health coverage through the Federal Employees Health Benefits, or FEHB, in retirement.
Even if you’re not sure you may return to federal work, you may want to think twice before cashing out, Murray said.
“It’s more about flexibility and keeping your options open,” Murray said.
Federal workers may have some flexibility with a Thrift Savings Plan that is like a 401(k) plan and allows employees to make contributions that are matched by government agencies.
Generally, participants who are at least age 59½ can make withdrawals without penalties.
In some cases, workers may qualify for the Rule of 55, which may allow them to take withdrawals from the TSP without having to pay a 10% early withdrawal penalty, provided they are at least age 55 when they leave their job (or age 50 for some public safety employees).
If you haven’t found another job yet, you can’t take a TSP loan, but you may be able to look at doing a hardship withdrawal, Murray said. Importantly, by doing so you may incur taxes and/or penalties, as well as delay your anticipated retirement date.
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