apr 27, 1816 - Tariff of 1816 & Henry Clay’s American System

Description:

Economic nationalism is a concept that promotes state interventionism over other business structures. In the sense of global trade, this would be a series of activities to develop, improve and defend national economies. The construction of transportation systems like roads and canals were a part of the movement. The protection of emerging
U.S. companies from European competition was another factor. As the first tariff enacted by Congress with an explicit function to shield U.S. imported goods from foreign competition, the Tariff of 1816 is significant. Congress had introduced low taxes on imports before the War of 1812 as a means of increasing government income. Manufacturers established several factories during the war to produce products that were once shipped from Britain. Then, after the war, American manufacturers worried that British products would be imported and take their business away from the American markets. In order to
shield U.S. producers from the competition, Congress would increase tariffs and create the first protective tariff in U.S. history. A strategy to advance the economic development of the nation was suggested by Henry Clay, a House of Representatives leader. His proposal was known as the American System and consisted of three components: 1) defensive tariffs, 2) a national bank, and 3) internal reforms. Clay claimed that protective taxes would promote American manufacturing and raise revenue to build transportation systems. Clay believed that protective taxes would stimulate American production and boost funding for the development of transportation networks. By having a common currency, a national bank will keep the economy flowing efficiently. Monroe, however, had repeatedly blocked legislative acts that would include funding for internal improvements, forcing the individual states to make the infrastructure their own.

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