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In arguing for more tariffs on goods imported to the United States, President Donald Trump has repeatedly claimed that the U.S. was its “richest” or “wealthiest” during the late 1800s and early 1900s because of tariffs. In multiple ways, his claim is wrong or misleading.
In terms of the overall U.S. economy, real (inflation-adjusted) gross domestic product per capita is many times higher today than it was during the so-called Gilded Age, which was a post-Civil War period of economic prosperity – largely for the wealthy – amid the nation’s industrial expansion.
In addition, several economists have said that Trump and others have given too much credit to tariffs for the economic growth that did occur in America more than 100 years ago. For example, in a 2000 paper, Douglas Irwin, a professor of economics at Dartmouth College, wrote: “That tariffs coincided with rapid growth in the late nineteenth century does not imply a causal relationship.” Irwin and other economists and historians have said that other factors, such as immigration and increased labor productivity, contributed more to the growth in that era.
But the way Trump tells it, the U.S. was at its best economically many, many years ago, because tariffs, otherwise known as customs duties, were a significant source of federal revenue.
“Our country is going to become rich again, very rich,” Trump said at the Conservative Political Action Conference on Feb. 22, when talking about new tariffs that he announced this year on imports from China and imports of steel and aluminum from all foreign countries.
He continued, “The word tariff is my favorite word in the dictionary. You know, we were richest, the richest, relatively, from, think of this, from 1870 to 1913. That was our richest because we collected tariffs from foreign countries that came in and took our jobs and took our money, took our everything, but they charged tariffs.”
Trump has even made the dubious suggestion that tariffs could be used to replace the federal income tax, which became law in 1913, with the ratification of the 16th Amendment to the U.S. Constitution. Federal income taxes account for about half of federal revenue each year.
“But you could wipe out your income tax. You could maybe not even have an income tax system when this thing works out,” Trump said while discussing tariffs at a dinner with Republican governors on Feb. 20.
“Because in the old days that’s what happened. Our country was the richest ever from 1870 to 1913. That’s when we were actually the richest and we were a full tariff country.”
Tariff revenue accounted for no more than about 60% of federal receipts during that period, according to a 2024 analysis by the White House Council of Economic Advisers. And more importantly, economists have said that it’s highly unlikely that the U.S. could raise enough money from tariffs on imported goods to match current income tax revenues.
In fiscal year 2024, just 1.7% of the more than $4.9 trillion in federal receipts came from customs duties on imports.
The ‘Richest’ Claim
We don’t know exactly how Trump defines the terms “richest” or “wealthiest.” We contacted the White House press office, but have not received a response.
When the New York Times wrote about Trump’s tariff remarks at this year’s CPAC, the newspaper said, “A White House spokeswoman noted [to the Times] that wages and the economy grew rapidly during the Gilded Age, but did not provide evidence of unparalleled prosperity in that era.”
In addition, based on real GDP per capita, Trump’s claim is false – because it is much higher now than it was more than a century ago.
As of 2022, it was $58,487 – nearly six times higher than $10,108 in 1913 and more than 12 times higher than $4,803 in 1870. That’s according to inflation-adjusted data from the Oxford University-based project Our World in Data, which calculated historical real GDP per capita based on international prices in 2011.
Trump has said that, because of tariffs, the U.S. had “so much money” at that time that “we didn’t know what to do.” In that context, he may have been alluding to the fact that in many of the years between 1870 and 1913, the federal government had budget surpluses, which occur when federal receipts exceed outlays.
The president has also falsely claimed that the U.S. had “no debt” during that period, and he has often mentioned a legitimate debate that occurred in 1888 over what to do about excess federal revenue due to high tariffs. Democrats wanted to cut tariff rates to lower revenue while Republicans wanted to raise tariffs more to discourage imports and reduce revenue.
But the U.S. also has had surpluses in years when tariffs were a significantly smaller share of federal revenues — such as in the 1920s, which was after the federal income tax was enacted in 1913 and became the primary source of funding for the government by far.
“This is just a function of government revenue growing faster than government spending,” Jeremy Horpedahl, associate professor of economics at the University of Central Arkansas, wrote about the surpluses in a February blog post about Trump’s “richest” claims. “And the growth of revenue during the 1870s and 1880s was largely driven by a rise in internal revenue — specifically, excise taxes on alcohol and tobacco (these taxes largely didn’t exist before the Civil War).”
Most recently, the U.S. had four consecutive budget surpluses in fiscal years 1998 to 2001. At that time, tariffs made up about 1% of annual federal receipts.
‘Other, Bigger’ Economic Factors
In general, some economists have said that supporters of tariffs, including Trump, have left the inaccurate impression that tariffs alone were the reason for the wider economic growth that occurred after the Civil War.
For example, in 2018, during Trump’s first term in office, Dartmouth’s Irwin did a podcast interview with American Enterprise Institute senior fellow James Pethokoukis, in which Irwin said said it was a “simplistic argument” to say that tariffs were responsible for rapid growth in the late 1800s:
Irwin, Aug. 31, 2018: But when you look at that era actually in the late 19th century the U.S. was very open. We were open for immigration and we indeed had massive immigration. We were open to capital from the rest of the world and were able to borrow and purchase a lot of technology. So, it’s not as though we were an isolationist country with big barriers. Yes, we did have fairly stiff tariffs on imported manufactured goods, but otherwise we were very open to what was going on in the world economy.
In fact immigration, as I point out in the book [“Clashing Over Commerce: A History of US Trade Policy“], was actually a key instigator in terms of the development of many manufacturing industries in the United States. …
In addition, it’s become very hard actually to attribute U.S. economic growth in the late 19th century to those higher tariffs. A lot of the key improvements in technology and a lot of the growth was in the service sector: telecommunications, railroads, and things of that sort. Manufacturing really didn’t grow much as a share of GDP in the late 19th century. A lot of that grew actually in the pre-Civil War period when tariffs were actually much lower — only in the range of 20% or so.
So, there is the simplistic argument that one encounters a lot — that tariffs allowed us to grow rapidly in the late 19th century — but the more you look into it you see it’s a really tough case to make. A lot of other factors were involved and the tariffs were probably third or fourth order. And it’s not even clear they had a positive impact as opposed to a negative impact.
In his 2000 paper, Irwin said he found “that growth then was driven largely by labor force expansion and capital accumulation, while productivity growth was undistinguished when put in a comparative perspective.” He ultimately concluded that tariffs were “probably not a key factor.”
Likewise, in a 2024 commentary piece, in which he cited work by Irwin and other economists, Scott Lincicome, vice president of general economics and trade policy studies at the Cato Institute, wrote: “In sum, U.S. tariffs imposed after the Civil War likely helped some American manufacturers and harmed others, but they were generally neither a major driver of nor drag on the sector’s and economy’s growth, which was instead driven by other, bigger factors, such as increasing productivity and an expanding labor force.”
Lincicome said that “no one should expect tariffs – whether back then or today – to drive the U.S. economy given all the other, bigger factors at play and the fact that trade just is a relatively small share of economic output.”
Tariffs vs. Income Taxes
Economists have been just as critical of Trump’s suggestion that the revenue from higher tariffs could be a substitute for federal income tax collections.
In October, after Trump had suggested on a number of occasions that tariffs could replace the federal income tax, Erica York, vice president of federal tax policy for the Tax Foundation, wrote a column explaining why the math wouldn’t work.
“Donald Trump has floated a proposal to replace the U.S. income tax system with a new system of tariffs, moving the United States back to the tax mix of the late 19th century. The plan, simply put, is a mathematical impossibility,” she wrote.
York noted that, in fiscal year 2023, the government collected $2.2 trillion from the individual income tax and only about $80 billion from tariffs. To make up the difference, Trump would have to impose an across-the-board tariff of 70% on all imported goods, she said.
What Trump suggested “is unworkable because of the sharp difference in the size of the respective tax bases,” York wrote, noting that projected adjusted gross income was $15.6 trillion and goods imports were $3.1 trillion in fiscal 2023.
Substantially higher tariffs would also likely lead to a reduction in imports. “Trump’s calculation ignores the precipitous drop in imports a tax increase of this magnitude would cause,” she said.
Kimberly Clausing and Maurice Obstfeld, both senior fellows at the Peterson Institute for International Economics, made similar points in a June post that asked, “Can tariffs replace the income tax?”
“Simply put, no,” was their answer. “It is literally impossible for tariffs to fully replace income taxes. Tariff rates would have to be implausibly high on such a small base of imports to replace the income tax, and as tax rates rose, the base itself would shrink as imports fall, making Trump’s $2 trillion goal unattainable.”
Clausing and Obstfeld said that scrapping the income tax in favor of higher tariffs would cause job losses, higher inflation, larger federal deficits and a recession.
“It would also shift the tax burden away from the well off, substantially increasing the tax burden on the poor and middle class,” they argued.
The income tax is considered to be progressive because higher-income households have a higher tax burden. On the other hand, tariffs are considered to be regressive taxes because they affect lower-income households more than others as a percentage of income. U.S. importers pay the tariff, but the costs are usually passed on to consumers in the form of higher prices.
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