By: Dr Malayendu Saha, Dr Soumya Mukherjee
The Quiet Weapon That Shapes Nations
From the dusty caravan trails of ancient Anatolia to modern-day high-speed fibre-optic cables carrying the contracts of today’s digital economy, tariffs have probably been one of the oldest and most enduring instruments of statecraft. Tariffs do not often capture the attention of inspirational revolutionary slogans or the dramatic focus of battlefields; nonetheless, their effect can be just as disruptive and transformational.
In 2025, the American government announced it was instituting an average import tariff of 18.6%, the highest tariff rate since the 1930s. The tariff impacted over 60 countries and is estimated to cost the average American household a total of an extra $2400 a year in products (such as groceries and electronics) at elevated prices due to tariffs.
There is nothing new about tariffs. For approximately 5000 years, empirical evidence suggests they have been used as tools for building empires, waging economic war, and causing the rise and fall of entire civilizations.
Ancient Tolls: Commerce as Power
The first tariffs were rough, but successful; they were tolls at the gates of cities, river crossings and mountain passes. Around 2000 B.C., Assyrian traders moving tin and textiles through Anatolia, were taxed as much as 10 % on the value of their cargo. The tax revenue paid for, not only the infrastructure to allow trade to occur, but the military campaigns to defend and secure the trade routes being taxed.
By the 5th century B.C. Athens had perfected the strategy with a 2 % export/import duty. This rate was low enough to encourage trade but high enough to provide resources for their powerful navy. This navy assured Athenian control over the Aegean Sea.
The Roman Empire went on to establish a consistent customs structure, where tariffs known as portoria contributed 70 to 80 % of provincial budgets. This revenue was used to pay for the roads, aqueducts and garrisons that underpinned Rome’s imperial ambitions.
Meanwhile, on the other side of the world, the Han Dynasty (206 B.C.–220 A.D.) in China, imposed duties along the silk road. It controlled the trade of silk, spices and ceramics that reached the west. The Ottoman Empire followed a similar model when it taxed trade between Europe and Asia by taxing trade in several strategic ports like Istanbul. It is recorded that the taxing of trade at ports and market hubs allowed the sultans of the Ottoman Empire to maintain armies that stayed strong and relevant for centuries.
A modern parallel: current strategic shipping lanes – from the Strait of Hormuz to the Malacca Strait – serve a comparable purpose. The global trade leverage belongs to whoever controls the choke points.
Feudal Fragmentation and the Rise of Mercantilism
After the fall of Rome, Europe crumbled into many kingdoms and principalities. Merchants experienced dozens of tariff posts even within a single nation, and the summation of these costs sometimes tripled the cost of goods before they reached their final destination.
As monarchies consolidated power in the late Middle Ages, they began enforcing tariffs with the goal of designing economic fate. England instituted export taxes on all raw wool, which gave rise to a domestic textile industry, which by the 15th century had employed almost 1/3 of the adjacent rural population.
In France, Jean-Baptiste Colbert applied aggressive trade protectionism that quadrupled customs revenues within two decades. Spain, filled with the bounty of silver and gold from the New World, taxed all bullion imports at over 20%, cushioning its imperial incursions but also, contributing to inflation which negatively affected its long term competitiveness.
The Enlightenment Breakthrough
The 18th century brought with it a revolution of ideas. Adam Smith’s Wealth of Nations (1776) condemned tariffs that protected inefficiency and harmed consumers. David Ricardo proved mathematically with his theory of comparative advantage, that countries do best by specialising in what they are most efficient at and trading for the rest.
The ideas developed by Smith and Ricardo spread rapidly. By the end of the 19th century Britain had reduced its average tariff rate from over 50% in 1820 to less than 10% by 1870, which was one of the key factors triggering the first great age of globalisation.
Industrial Revolution: Tariffs and National Identity
The repeal of the Corn Laws in Britain in 1846 was a turning point. These laws were intended to keep grain prices high so landowners would profit; they raised the price of bread for millions. The repeal of these laws lowered bread prices by nearly 50% in only three years, increasing industrial output and reducing urban poverty.
In contrast, the United States continued a policy of high tariffs to protect its nascent industries. The “Tariff of Abominations” (1828), which charged tariffs of around 45%, infuriated agricultural Southern States and further inflamed tensions that contributed to the Civil War. Germany’s Zollverein customs union eliminated internal tariffs and raised inter-state trade by 80% between 1834 and 1860, paving the way for economic underpinnings for political unification.
20th Century: Tariffs as Economic Weapons
The Smoot–Hawley Tariff Act of 1930 is a classic warning lesson. Introduced to protect American jobs during the Great Depression, it increased tariffs above 60% on 20,000 goods. Instead of recovery, worldwide trade fell by 66% in two years, causing mass unemployment and economic nationalism.
The post-war leaders noticed. The Bretton Woods Conference of 1944 established the IMF, World Bank, and GATT- all existed to create stability through reduced trade barriers. Tariffs fell from an average of 22% on average in 1947 to less than 5% in 1994. Providing an unprecedented opportunity for growth worldwide.
21st Century: Beyond Steel and Soybeans
The U.S.–China Trade War (2018–2020)
Modern-day tariff disputes are no less important. The U.S.-China trade war, for example, was launched with tariffs as high as 25% on hundreds of billions of dollars’ worth of goods, interrupting international supply chains in electronics, automotive, and agriculture. Research suggests it cost the U.S. economy $316 billion, and contributed to a reduction in global GDP growth of 0.8%.
2025 U.S. Tariff Surge
The most recent U.S. tariffs, according to Yale Budget Lab, have led to a 39% increase in footwear prices, 37% increase in apparel prices, and 12% increase in vehicle prices. Michigan has lost 7,500 jobs in the manufacturing sector and faces $23.2 billion in lost investments, as reported by Associated Press.
Stagflation Fears
Economists are concerned such significant tariffs might lead to stagflation, or higher inflation and lower growth. The Federal Reserve estimates that if prices do not increase due to tariffs, core inflation in 2025 might be close to 2%, its target range, as reported by the CBS News.
Carbon Tariffs and Climate Policy
The EU’s Carbon Border Adjustment Mechanism, or green tariff, will add as much as €90 per tonne of CO₂ charged on importing from countries in key industries that have high emissions. The EU, however, has exempted the 180,000 small importers that will not pay any price increases due to these tariffs. As a result, the EU Action Center stated that it continues to cover 99% of CO₂ emissions.
The Tariff’s Enduring Paradox
In the last 4,000 years — from the tolls collected in ancient Mesopotamia when ships paid their taxes and duties and the tax, tolls, and tariffs of today with economically powerful AI-driven customs algorithms — tariffs have provided protection (shield) and opportunity (sword). They can protect jobs but raise costs; they can protect industries but invite retaliatory tariffs. Given the challenges creeping in from inflation, climate change, and geopolitical competition, the question of tariffs in the modern global economy is whether tariffs will drive us to build bridges or erect walls?
History informs us that tariffs can either build walls or bridges. The choice to protect jobs, industries, and capabilities is not about mechanism and elements but about intent.
About authors:
- Dr Malayendu Saha – Director, School of Management, Swami Vivekananda University
- Dr Soumya Mukherjee – Associate Professor, Swami Vivekananda University
