The stürm und drang all over the media this week is about U.S. President-elect Donald Trump, on Monday, doubling down on his tariffs saying that he’d impose across-the-board 25% tariffs on all goods from China, Mexico, and Canada until there’s no more fentanyl or undocumented immigrants and asylum seekers coming into the U.S.

That’s a substantial lift, and if he follows through with the threat (which seems likely, although I’d bet money that he’ll drill lots of holes in those tariffs to satisfy corporate donors) it’ll cause a considerable disruption in American commerce. Those three countries, after all, account for more than 40% of all American trade.

Weirdly, Trump may be doing the Democrats a favor by taking this position, and I don’t mean the possibility that he’ll wreck the economy and thus his party’s chances in 2026 and 2028 (although that’s real, too).

Tariffs can be a good thing for a country, if done right.

Tariff-free trade was a central cornerstone of former President Ronald Reagan’s neoliberal agenda; he and George H.W. Bush wrote the NAFTA agreement that Bill Clinton later signed, for example. I lay this out in considerable detail in The Hidden History of Neoliberalism: How Reaganism Gutted America. Tragically, Bill Clinton and his Larry Sommers/Robert Rubin crew embraced neoliberalism with gusto, putting the final nail in the meaningful use of tariffs to protect American manufacturing and the jobs associated with it.

Democrats like Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) have been working for years to pull the Democratic Party back from the neoliberal free trade brink, and if Trump pushes through his tariffs in a big way it may help shatter what’s left of the neoliberal consensus (at least with regard to trade) in the Democratic Party. That would be a Very Good Thing, both for the Party and for the nation.

Tariffs can be a good thing for a country, if done right. People who grew up in the Midwest (like me) know all about tariffs; we learned about them as children (I remember 5th Grade civics!).

Trump, however, did them so badly last time that they backfired, cost us a fortune, and forced the federal government to subsidize Midwestern farmers. Odds are, if he keeps to his current rhetoric, he’ll do the same, and Democrats should be ready with reasonable talking points; this could end up working tremendously to their advantage if they’re willing to embrace reasonable tariffs and other trade protections to bring manufacturing back to the U.S.

So, let’s reexamine how tariffs can work when done right, their role in American history, and why we should be discussing them now without hysterics.

Tariffs are taxes paid to the federal government on imported goods. And, like all taxes, they have two purposes: to raise revenue and to alter behavior. In the case of import tariffs, the second purpose (changing behavior, in this case encouraging entrepreneurs to start manufacturing companies aka factories here in America) is far more important than the first.

It all began here in America when General Henry Knox rode up to Mount Vernon in the late summer of 1789 to tell George Washington that Congress had just elected him as the first president of the United States. Washington took the news, and had two requests for his old friend.

First, he asked Knox to let folks know he’d be delayed by a few days because he wanted to say goodbye to his mother, who was elderly and ailing (turned out, it was the last time he saw her alive).

Second, Washington asked General Knox to ride all the way up to Connecticut to visit Daniel Hinsdale, a man who’d been secretly manufacturing black-market American-made fine men’s clothing in defiance of British law for decades. Knox took Washington’s measurements and then, a month later, brought to New York (where the swearing-in took place on what is now Wall Street) a fine American-made suit, which Washington proudly wore. (The suit was brown; the black suit of his later, famous painting was British formal wear.)

This incident highlighted the manufacturing crisis facing our new nation, and Washington was acutely aware of it.

The British, for two centuries, had been extracting wealth from the American colonies by forbidding us from manufacturing everything from fine clothing (thus Hinsdale’s illegal business) to weaponry to sophisticated machinery: All such items had to be imported from British manufacturers. We sold England cheap raw cotton, for example, and they forced us to buy back expensive fine cotton clothing manufactured on the looms of British cities. (Homespun was still legal in the colonies.)

They also forced us to buy tea—then the primary American beverage—from the East India Company, an outrage that led directly to the Boston Tea Party of 1773, which arguably kicked off the American Revolution. Thus, when Washington came into office, the first challenge he faced was how to build an American manufacturing base that wasn’t dependent on British imports.

Thirteen years before Washington’s inauguration, British economist Adam Smith had made worldwide headlines with his bestselling 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations, proposing that the main thing that made a country rich was independence in manufacturing.

The process of converting raw materials of little value into finished products with a high value (manufacturing) was, to Smith’s mind, the best and only practical way a nation could grow wealthy without overseas conquest and plunder.

A tree limb laying on the forest floor, for example, had no monetary value, but when labor and the tool of a knife were applied to it and it was turned into an axe-handle—a process called manufacturing—it now had a value that could be passed down through generations.

Smith called that wealth. That axe-handle became part of the aggregate wealth of the entire nation, and even if it was sold overseas that wealth would still remain here because its value was simply converted into currency which stayed in America.

This understanding led President Washington to commission his Treasury Secretary, Alexander Hamilton, to propose to Congress in 1791 an 11-step Report on the Subject of Manufactures, also known as The American Plan.

At the core of Hamilton’s plan were protective tariffs on goods that were then being imported but could be easily made in the USA. The tariffs would increase the price of the imported goods so much that they’d encourage American entrepreneurs to start factories to make the same things here.

(Hamilton’s plan also included government subsidies for companies that wanted to move manufacturing to the U.S., federal subsidies for the development of new technologies, a massive investment in infrastructure [particularly roads and water-power systems] to support industry, and a requirement that the U.S. government purchase only American-made products whenever possible.)

Within two decades, Congress and the Washington, Adams, and Jefferson administrations had put nearly all of Hamilton’s plan into effect, and major parts of it stood all the way up until Reagan’s neoliberal revolution kicked off in 1981.

Today, you’ll search for hours to find a single made-in-America product in most big-box stores.

Hamilton’s plan was such a successful and important part of how America became the wealthiest nation on Earth, and produced so much revenue, that virtually 100% of the cost of operating our federal government—from our founding until the Civil War—came from tariffs. The salary of every president from George Washington to Abraham Lincoln was paid by tariffs (some were domestic interstate tariffs, like on alcohol), as was the salary of every federal official and the cost of everything else the federal government did.

Fully two-thirds of federal government revenue came from tariffs from the end of the Civil War until the World War I era and the 1913 passage of the 16th Amendment (the income tax); a third of federal government revenue came from tariffs between WWI and WWII.

Today, however, it is under 2%.

Prior to Reagan, American manufacturing—kept on this continent by the force of tariffs—was at the core of the American Dream, with good union manufacturing jobs offering stability and prosperity to a growing American middle class from the 19th century until the 1990s. Tariffs also made America the technological leader of the entire planet.

The concept was simple: If a product could be made for $70 with cheap Chinese labor, but cost $100 to make with U.S. labor, we’d put a $30 tariff on it to equalize the labor costs. Ditto if overseas manufacturing was subsidized by governments or by a lack of expensive pollution controls or worker safety protections: we’d match those cost advantages with tariffs.

There was still a heck of a lot of trade going on in the world when tariffs were common. As late as 1975, our imports and exports were pretty much in balance (we had a $12 billion surplus).

And then came the neoliberal sales pitch of the 1980s, as I lay out in detail in The Hidden History of Neoliberalism: How Reaganism Gutted America.

If only we could get rid of those nasty tariffs—we had over 20,000 categories of products with specified tariffs—by reducing them to zero or very, very low numbers, Reagan, Bush, and Clinton told us, then American consumers would benefit because big retailers like Walmart could........

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