1/ Tariffs have dominated recent news on US-China trade war. But they have always been pivotal to China’s history, shaping modern nationalism and statecraft. A long thread on tariffs in China’s history with lots of images and charts—and the small part US played in that history. 
2/ Beginning with the First Opium War (1839-42), the Qing dynasty during the 19th c. lost a series of wars to foreign powers. In the wake of defeat, it signed several “unequal treaties” that accorded many privileges to foreign powers and unfettered access to the China market.
3/ Key features of treaties included opening ports to trade, creating foreign concessions, and granting extraterritoriality—i.e. immunity for foreigners from Chinese laws. These treaties were not fully abrogated until 1943 and have come to symbolize “national humiliation.”
4/ But another key feature of the treaties was the loss of tariff autonomy. China was required to keep duties on most foreign goods at low fixed rate. Except for periodic adjustments Chinese duties remained at roughly 5% until 1928 when China recovered the right to raise tariffs.
5/ Though tariffs were fixed at a low rate, they still generated considerable revenue for the Qing. Before the disasters of the Sino-Japanese War (1894-95) and Boxer Uprising (1899-1901), customs duties made up a quarter of central government's revenues just behind the land tax.
6/ Yet many critics railed against the fixed tariff. Qing officials like Zeng Guofan saw regulating commerce as key to resisting foreign imperialism and reversing China’s trade imbalance. To fight what he called a “war of commerce” 商戰 the empire needed control over its tariffs.
7/ A later critic was Sun Yat-sen, “father of the Chinese republic.” To Sun, the loss of tariff autonomy not only deprived China of revenues and symbolized its lack of sovereignty; it also removed a shield to protect its burgeoning industries.
8/ The tariff also became an issue of intense public discussion. Scores of books on “The Tariff Problem” 關稅問題 were published in early 20th c. arguing that tariff autonomy was the unalienable right of the nation. This 1926 advertisement reflected public interest in this topic.
9/ Today extraterritoriality is more notorious in the national imagination than loss of tariff autonomy. But officials and public then actually considered the latter more problematic than the former. International conferences to renegotiate treaties all ended inconclusively.
10/ Only in 1928 did China recover tariff autonomy. That year the Nationalists (KMT) under Chiang Kai-shek nominally united China and abrogated the fixed tariff in the treaties. Unlike previous appeals to all foreign powers the KMT succeeded by appealing to individual countries—
11/ —the first of which was the US, a signatory of the unequal treaties despite never formally waging war against China. On July 25 1928 the US and China signed the Treaty Regulating Tariff Relations restoring China’s right to set its own tariff. Other countries soon follow suit.
12/ Why was the US the first foreign power to surrender this privilege? American opinion was sympathetic to KMT and less willing to defend privileges in China. More importantly US investment in and trade with China were relatively small by 1920s. Diplomacy trumped economics.
13/ Upon recovering tariff autonomy China proceeded to raise duties on many foreign goods from about 5% to more than 25%. Higher tariffs proved a major financial boon, dramatically boosting government revenues.
14/ So important were tariffs that they made up half of the government’s revenues during decade from 1928 to 1937. Customs duties were also used as collateral for many foreign loans the Chinese government issued.
15/ But what was good for the government was not necessarily good for everyone else. The heaviest duties were levied on imports like kerosene, sugar, and nylon—consumer goods with widespread and inelastic demand. High tariffs raised prices and sparked massive smuggling epidemic.
16/ Higher tariffs also exacerbated geopolitical tensions. Japan was China’s largest trade partner and foreign investor by 1930s. Its exports were hit very hard by new duties. Relations between the two were already tense and higher tariffs contributed to outbreak of war in 1937.
17/ In any case, China’s turn to protectionism after 1928 presaged a global trend. As the Great Depression spread worldwide, many other countries soon levied prohibitive tariffs to protect their own industries.
18/ It also presaged China’s move towards “economic control” 經濟統制: state efforts to nurture domestic industries, limit imports, and discipline consumption. Many officials and critics supported high tariffs and trade restrictions to realize the goal of state-led development.
19/ Such policies endured after 1949. Communist China inherited Nationalist China’s trade and industrial strategies. The two regimes levied heavy tariffs on luxury and consumer imports, reflecting their shared anti-consumption bias and state-led development prerogative.
20/ In sum: Tariffs played a major role in modern Chinese history. They helped shape Chinese nationalism, provide critical funding to different regimes, and serve as pivot of economic strategy. The very visible hand of Chinese state in the economy could be traced to this history.
21/ For more on this history please see @FBoecking’s excellent NO GREAT WALL, the definitive work on Chinese tariffs. See also BREAKING WITH THE PAST by Hans Van de Ven, GERMANY AND REPUBLICAN CHINA by William Kirby, and of course CHINA’S WAR ON SMUGGLING by yours truly.
