Tariffs, Trade Wars, and the Wrong Lessons from History: Why McKinley’s Policies Don’t Fit Today’s Economy

At the turn of the 19th century, the United States underwent a profound transformation, shifting from an agrarian economy to an industrial society. Rapid industrialization and urbanization fueled economic growth, but they also gave rise to monopolistic power and significant societal challenges. In this evolving landscape, William McKinley canvassed with a vision to protect and expand American industry through tariffs and international trade policies.

In his inauguration speech, President Trump turned the clocks back six score and four years invoking the legacy of William McKinley, highlighting the economic gains attributed to McKinley’s protectionist tariffs. Trump’s remarks also criticized modern trade agreements, lamenting perceived losses of American sovereignty over projects like the Panama Canal.

Republican Ohioan William McKinley, the 25th President of the United States (1897-1901), addressed some of the economic challenges by imposing protectionist tariffs and policies aimed expanding American influence abroad. Grafting these policies on a globalized and highly interconnected economy in 2025 would have deleterious consequences.

McKinley’s era was characterized by a burgeoning domestic manufacturing sector, keen on one-upmanship with European industries. He championed high tariffs, most notably the Dingley Tariff Act of 1897, to shield American industries from foreign competition and foster internal economic growth. McKinley believed that protectionist guardrails could insulate U.S. manufacturers from being undercut by cheaper imports, allowing them to grow and compete on a global stage. This policy, along with McKinley’s focus on initiatives like the contentious Open Door Policy in China, reflected a dual strategy: protecting domestic markets while opening foreign ones. McKinley’s moves did prove successful in providing a foundation for America’s industrial dominance, yet the benefits of these policies were neither immediate nor universal. Consumers initially shouldered the burden of higher prices, and it took years for domestic production to expand sufficiently to offset these costs.

Here in the beginning of 2025, the global economic landscape bears little resemblance to that of the McKinley era. The United States, formerly a self-contained industrial powerhouse, now depends heavily on complex international supply chains. A substantial portion of manufacturing is sitting overseas, driven by globalization and the pursuit of cost efficiency. In this environment, Implementing McKinley-style tariffs in today’s economy would likely have the opposite of their intended effect, driving up costs for businesses and exacerbating inflation. This is particularly concerning in an economy already grappling with persistent price instability.

The time required to restore domestic manufacturing capacity underscores the impracticality of this approach in a modern context. Building factories, training a workforce, and reestablishing supply chains are endeavors measured in years, not months. Financing such development would rely on debt capital markets, which are significantly more efficient today than in 1900. The short-term impact of tariffs, such as higher prices for goods ranging from electronics to raw materials, would be felt immediately. The pollsters told us back in the autumn that the high cost of living for John Q. Public was one of the main drivers behind the voter swing to the Republican Party.

Political Ramifications of Economic Policy

The political ramifications of protectionist policies are immediate and significant. For the 435 members of the House of Representatives, the journey to reelection began already on January 21, 2025, as they face mounting pressure to deliver tangible economic results.  Article I, Section 2, of the US Constitution specifies that members of the House of Representatives are to be elected every two years. With the Republican Party holding the majority in both chambers of Congress, the pressure to deliver tangible economic results within a short timeframe is immense. House members face a restless electorate, particularly as inflation remains a dominant concern.

Moreover, there are many members of Congress, on both sides of the aisle, who look at the large pile of IOUs incurred by the Federal government and are concerned not only about servicing that debt, but how to manage spending going forward. The recent vituperative scenes witnessed over the naming of a House Speaker may become more commonplace if the inflationary pressures are not dampened in the months to come.

Protectionist policies risk igniting trade wars in an environment where global interdependence is the norm. Retaliatory tariffs imposed by trading partners—nations with whom we collaborate, not adversaries—would exacerbate economic instability, potentially harming American exporters and further undermining economic recovery. In contrast to McKinley’s time, when the United States sought to assert itself in a competitive yet relatively isolated global economy, the modern world is based upon cooperation and strategic partnerships. Isolationist economic policies seek to alienate which could lessen U.S. influence on the global stage.

The lessons of history reveal that economic policies must evolve to meet the demands of their time. While McKinley’s protectionist tariffs were arguably an apt vitamin for the nascent industrial economy of the late 19th century, they are ill-suited for the intricacies of today’s interconnected global market. Fostering domestic industry and reducing inflation seem to make more sense via long-term investments in infrastructure, education, and innovation, not necessarily via the blunt force trauma of tariffs. History shows that economic growth is best achieved through policies that embrace the complexities of the present rather than clinging to the strategies of the past.

TR

The economic legacy of McKinley’s era cannot be fully understood without considering the contributions of his successor, Theodore Roosevelt. McKinley’s assassination six months into his second term brought Theodore Roosevelt to the presidency, marking a pivotal shift in U.S. economic policy. While McKinley’s policies focused on shielding American industries from external competition, his successor, Theodore Roosevelt, addressed the internal challenges posed by monopolistic power. Together, their approaches marked a turning point in the evolution of U.S. economic policy.

Roosevelt inherited an America that was rapidly industrializing but increasingly dominated by powerful trusts and monopolies.

These industrial giants, born from the laissez-faire environment of the late 19th century, consolidated wealth and power to such a degree that they stifled competition, limited consumer choice, and contributed to growing inequality. Roosevelt, with his characteristic vigor and reformist zeal, sought to dismantle these monopolies, ushering in an era of trust-busting and increased regulation that profoundly shaped the American economy.

Roosevelt’s approach to big business was pragmatic yet assertive. He differentiated between “good” trusts—those that operated efficiently and fairly within the bounds of the public interest—and “bad” trusts, which abused their dominance to exploit consumers and crush competitors. His administration aggressively used the over a deacde old Sherman Antitrust Act to break up monopolies like the Northern Securities Company, a vast railroad trust, signaling a departure from the hands-off policies of his predecessors. Roosevelt’s actions fostered a more competitive economic environment, ensuring that no single entity could dominate an industry to the detriment of innovation and consumer welfare. By reining in corporate excesses, Roosevelt not only curbed economic inequality but also restored faith in the government’s ability to act as a counterbalance to concentrated power.

This framework of promoting fair competition had lasting effects on the U.S. economy. By dismantling monopolies and encouraging a level playing field, Roosevelt’s policies stimulated innovation and entrepreneurship, providing opportunities for smaller businesses to thrive. His actions also laid the groundwork for the modern regulatory state, establishing a precedent for federal oversight in critical areas of the economy. This balance between encouraging growth and ensuring accountability was instrumental in creating a dynamic, adaptable economy that could respond to the challenges of the 20th century. Of course, Theordore’s famous fifth-cousin, Franklin Delano Roosevelt, did take the US economy into a whole different direction 30 years later, but that is a story for a different day. [As a reading recommendation about FDR's policies, I would recommend reading "The Forgotten Man: A New History of the Great Depression" by Amity Shlaes]

In today’s context, the Theodore Roosevelt approach offers a different path for navigating the complexities of a globalized economy. While McKinley’s protectionist tariffs sought to shield American industry, Roosevelt’s trust-busting policies attempted to address the structural imbalances within the domestic economy, fostering resilience and competition.

Policymakers in 2025 are faced with a conundrum of modern-day monopolies in industries like technology and e-commerce. Roosevelt’s vision of a regulated yet competitive marketplace serves as a string around the finger reminder that robust oversight and fair competition are viable alternatives for long-term economic health. Just as Roosevelt’s actions stabilized the economy in his time, a modernized version of his framework could help ensure that the benefits of economic growth are shared more equitably today.

Unlike McKinley’s era, where domestic production dominated the economy, today’s United States is deeply intertwined with global supply chains. From electronics to pharmaceuticals, critical industries rely on imported materials and components, making unilateral tariffs more disruptive than protective.

In 1900, 30% of all deaths in the United States occurred in children under the age of five, a stark reminder of the hardships faced during McKinley’s era. Policies that were suitable for an industrializing nation have little relevance in today’s interconnected global economy. Modern policymakers must embrace the complexities of globalization, investing in innovation and collaboration to drive progress. The lessons of history demand that we learn from the past without attempting to replicate it.