Weapon of peace or trade war? Trump slashes India tariffs to 18% in historic deal. But the Founding Fathers might disagree

While Trump framed the India tariff reduction as an act of reciprocity — an idea deeply rooted in America’s early trade policy — the comparison is more complicated.

The First Tariff Act of 1789 treated reciprocity as a safeguard against discrimination and a means of nation-building, not as a coercive tool of foreign policy.

Trade policy in a new nation 

Over two centuries ago, on this day — February 4, 1789 — George Washington was unanimously chosen as the first president of the United States. The new Congress then convened in March to deliberate on import duties and foreign commerce. As students of the Enlightenment and opponents of British mercantilism, the Founding Fathers favoured free and open commerce among nations and the abolition of restraints that inhibited trade.

Benjamin Franklin, George Washington, and Thomas Jefferson all extolled the benefits of free commerce. Franklin said, as academic Douglas A Irwin cites in his book Clashing Over Commerce: A History of US Trade Policy (2017), “Most of the restraints put upon it in different countries seem to have been the projects of particulars for their private interest, under the pretense of public good.”

The term free trade, however, did not mean zero tariffs or the absence of all government restrictions on trade. Irwin writes, “Free trade could be more accurately characterized as open trade in which countries could impose import duties and regulate shipping but did so in a non-discriminatory manner.”

Some founders argued that it might be necessary to protect domestic industries essential to national defence. This lesson was learned during the American Revolution, when the country was dependent on essential imported supplies such as gunpowder and clothing.

In addition to defence, reciprocity was another feature emphasised by the US Founding Fathers. “Thus, while the founding fathers favoured free and open trade in principle, they were also deeply concerned about national defense and foreign discrimination against American commerce,” notes Irwin.

The First Tariff Act 

On April 8, 1789, two days after Congress first achieved a quorum, future fourth US president James Madison introduced a bill in the House of Representatives to levy duties on imports. Citing the government’s urgent revenue requirements, Madison argued that a tariff should be imposed without delay so that spring importations from Europe could be taxed. Several members argued that, beyond raising revenue, tariffs should also be levied to promote domestic manufacturers.

President Washington signed the tariff bill on July 4, 1789, making it the second law enacted by the new federal government. The duties went into effect in August 1789.

Irwin writes, “The preamble of the new law stated that import duties were necessary ‘for the support of government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures.’”

The bill consisted of three parts: specific duties on select products, ad valorem duties on most other goods, and duty-free treatment for a small number of items. Specific duties were imposed on selected articles, such as hemp, cordage, nails, and iron and glass manufactures. “These articles were selected, and made subject to the specific duties, with the clear intent of stimulating domestic production,” notes economist F W Taussig in The Tariff History of the United States (1909).

The First Tariff Act of 1789 was enacted to secure the republic and protect its position in global commerce. By contrast, Trump’s decision to lower tariffs on India in exchange for reductions in its oil imports from Russia illustrates how tariffs have evolved from instruments of state formation into weapons of geopolitical leverage.