The History of Tariffs and Their Impact on the Energy Markets

From the late 18th century until the ratification of the 16th Amendment in 1913 (which allowed for a federal income tax), tariffs on imported goods often contributed 50% to 90% of federal income.

Tariffs, a tool of economic policy that predates the founding of the United States, have played a central role in shaping domestic industries, foreign policy, and international trade dynamics. While often discussed in terms of consumer goods or agricultural products, tariffs have also had significant—if sometimes indirect—impacts on the energy markets. These impacts have spanned over centuries, from the coal-powered industrial revolutions of the 19th century to today’s globalized oil, gas, and renewable energy economies.

This article explores the history of tariffs in the United States, how these policies shaped energy production and consumption, and how tariff strategies have impacted broader economic systems and society, with particular focus on the fossil fuel and renewable energy industries.

1. Tariffs in Early American History and Their Economic Role

In the early years of the American republic, tariffs were the primary source of federal revenue. From the late 18th century until the ratification of the 16th Amendment in 1913 (which allowed for a federal income tax), tariffs on imported goods often contributed 50% to 90% of federal income.

During this time, the U.S. was attempting to foster a domestic industrial base. Tariffs were used to protect emerging American industries from cheaper British and European imports. While these tariffs were not specifically targeted at energy products, they shaped the growth of industries that depended on coal—the dominant energy source of the time.

For example:

• Protective tariffs enabled the growth of U.S. steel, iron, and manufacturing, which in turn increased demand for coal.

• Railroads, themselves both a consumer and carrier of coal, also benefited from tariff-fueled industrial expansion.

In this early era, tariffs indirectly fueled the expansion of the coal industry, by promoting industries reliant on heavy energy consumption.

2. The Shift to Oil and the Absence of Direct Tariffs

As the 20th century progressed, coal began to lose ground to oil as the dominant energy source, particularly after the proliferation of the automobile. Interestingly, there were few direct tariffs on crude oil itself for much of U.S. history. Instead, domestic subsidies, strategic reserves, and tax incentives shaped the market.

But international oil markets became deeply entangled in geopolitical tensions where tariffs and sanctions acted as tools of both trade and national security.

Case Study: Oil Tariffs Under FDR and Nixon

• In the 1930s, President Franklin D. Roosevelt imposed import quotas and duties on foreign oil to protect U.S. domestic producers, particularly in Texas and Oklahoma.

• During the 1973 oil crisis, President Nixon imposed tariffs on imported oil to discourage reliance on foreign energy and to combat the OPEC oil embargo.

These actions were aimed at protecting national energy security rather than purely economic gain.

The tariffs under Nixon, combined with price controls, had unintended consequences:

• Created domestic fuel shortages.

• Caused massive lines at gas stations.

• Disrupted the trucking and transport sectors.

• Pushed the U.S. to create the Strategic Petroleum Reserve (SPR) and foster new alliances in the Middle East.

This period revealed the fragility of the energy market when manipulated by tariffs or restrictions, especially when coupled with global supply chain shocks.

3. The Reagan Era and Free Trade in Energy

By the 1980s, President Ronald Reagan ushered in a free-market philosophy, lifting many controls and tariffs on oil imports. He eliminated the entitlements program that effectively subsidized domestic producers by making refiners pay more for imported crude oil.

This deregulation:

• Led to a drop in domestic oil production.

• Made the U.S. more dependent on foreign oil.

• But it lowered prices for consumers and helped usher in an era of global oil abundance.

Reagan's approach highlighted the trade-off between domestic energy independence and global energy price stability. Tariff-free markets benefited refineries and consumers but weakened smaller oil producers in places like Texas, Alaska, and the Dakotas.

4. The Renewable Energy Era and Trade Wars

In the 21st century, tariffs returned with renewed intensity, particularly under the Obama and Trump administrations, though for different reasons.

Solar Panel Tariffs

The solar energy market became a major front for tariff battles.

• In 2012, the Obama administration placed anti-dumping tariffs on Chinese solar panels, citing unfair subsidies by the Chinese government.

• In 2018, the Trump administration expanded these tariffs, placing 30% duties on imported solar panels to protect U.S. manufacturers.

These actions:

• Raised prices for solar installations in the short term.

• Slowed the adoption rate of solar in residential and commercial sectors.

• Protected a small number of U.S. solar manufacturers, though many argued the installation and service sectors lost more jobs than were protected.

5. Tariffs and Natural Gas Infrastructure

While liquefied natural gas (LNG) exports are a relatively new frontier for U.S. energy, tariffs have begun to play a role here too.

For instance:

• The Trump tariffs on imported steel and aluminum (Section 232 tariffs in 2018) impacted LNG terminal construction, pipeline infrastructure, and refinery upgrades.

• Companies like Cheniere Energy and Kinder Morgan reported significant cost increases in their infrastructure projects due to tariffs on imported materials.

This raised concerns about the competitiveness of U.S. LNG exports, especially in Asia and Europe, where price competition is fierce.

6. Retaliatory Tariffs and Energy Exports

Tariffs don’t just affect imports—they invite retaliation.

• During the U.S.-China trade war, China responded to U.S. tariffs by placing duties on U.S. crude oil, propane, and LNG.

• U.S. exports to China in energy commodities plummeted, redirecting shipments to India and Europe but at lower prices.

This illustrated the vulnerability of U.S. energy producers to global trade policy, particularly as the U.S. became a net exporter of energy for the first time in decades.

7. Environmental and Societal Impacts

Tariffs on energy-related products can also influence environmental and social outcomes.

• Higher prices for solar panels can influence the marketplace with “renewable” or “emerging energy” sources, creating issues with traditional energy sources.

• Tariffs on critical minerals used in EVs and batteries—like lithium and cobalt—can manipulate the marketplace and free trade.

• In coal country, tariffs aimed at preserving local jobs may indirectly create political and economic tensions.

Meanwhile, energy-intensive industries like fertilizer manufacturing, cement, and aluminum are particularly vulnerable to tariff-induced cost swings, which can trickle down to food prices, housing, and infrastructure development.

8. The Future: Green Tariffs and Carbon Border Adjustments

Looking forward, new forms of tariffs are emerging—not to protect domestic industries in the traditional sense, but to penalize carbon-intensive imports.

Example: European Union’s CBAM (Carbon Border Adjustment Mechanism)

• A form of climate tariff, this policy proposes to tax imported goods based on their carbon footprint.

• The U.S. is considering similar mechanisms, which would have ripple effects on foreign oil, gas, steel, and cement imports.

Such policies will:

• Create new challenges for developing nations.

• Incentivize cleaner production methods.

• Force U.S. energy exporters to demonstrate environmental compliance or face market barriers.

Conclusion

From colonial America’s customs houses to 21st-century battles over solar panels and steel, tariffs have remained a powerful yet double-edged sword. Their impact on the energy market has often been indirect but profound, shaping:

• The rise and fall of energy sources.

• The cost of infrastructure.

• International trade relationships.

• The pace of the green energy transition.

As energy markets become more global and climate concerns intensify, tariff strategies will increasingly intersect with environmental, geopolitical, and economic priorities. Whether protecting domestic jobs or securing strategic resources, tariffs will continue to influence how nations power themselves—and at what cost.

Article by Jason Spiess. Spiess has over 35 years of media experience from being the host to the publisher to an editor to the executive producer to having principal ownership in several media companies.

Spiess is currently the host of several newsmagazine radio podcasts that carry a 20-plus radio network, as well as worldwide through iHeart, Spotify and other podcast platforms. Spiess also operates a diverse professional social media audience with his media brands of over a combined 400K followers.

In addition to his newsmagazine radio podcasts, Spiess is a regular contributor to many industry publications and traditional news websites.

Spiess is a full-time father, cancer survivor, small regenerative/permaculture farmer, environmental steward, educator, speaker, author and graduate of North Dakota State University. Spiess also operates an off-the-grid office integrating sustainable solutions, including the best practices with an Industrial Forest and Digital Diversity.

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