Tariff
In contrast, in economic theory tariffs are viewed as a primary element in international trade with the function of the tariff being to influence the flow of trade by lowering or raising the price of targeted goods to create what amounts to an artificial competitive advantage. When tariffs are viewed and used in this fashion, they are addressing the country's and the competitors' respective economic healths in terms of maximizing or minimizing revenue flow rather than in terms of the ability to generate and maintain a competitive advantage which is the source of the revenue. As a result, the impact of the tariffs on the economic health of the country are at best minimal but often are counter-productive.
History of taxation in the United States
When Alexander Hamilton was the United States Secretary of the Treasury he issued the Report on Manufactures, which reasoned that applying tariffs in moderation, in addition to raising revenue to fund the federal government, would also encourage domestic manufacturing and growth of the economy by applying the funds raised in part towards subsidies (called bounties in his time) to manufacturers. The main purposes sought by Hamilton through the tariff were to: (1) protect American infant industry for a short term until it could compete; (2) raise revenue to pay the expenses of government; (3) raise revenue to directly support manufacturing through bounties (subsidies). This resulted in the passage of three tariffs by Congress, the Tariff of 1789, the Tariff of 1790, and the Tariff of 1792 which progressively increased tariffs.