From Ohio History Central
Tariffs are taxes placed on goods imported from foreign countries. Tariffs serve two main purposes. First, these taxes allow a nation to raise money. Second, tariffs protect a nation's goods from cheaper priced foreign items.
Since the United States of America's founding in 1788, various groups of Americans have differed on the type of economy that the new nation should establish. Some Americans, including members of the Federalist Party, believed that the United States should industrialize. Other Americans, including members of the Democratic-Republican Party, favored an economy based upon agriculture. In the late 1700s and the early 1800s, most Ohioans favored the Democratic-Republican vision, but the difficulties these people endured living on the frontier induced them to become more receptive to industrialization. Isolated from Eastern states by the Appalachian Mountains, many Ohioans had to rely upon themselves or their neighbors for the items they needed to survive. Easterners had much easier access to European manufactured goods, saving large amounts of time because they did not have to produce the goods themselves. Ohioans primarily relied on their own ingenuity and hard work to make the items they needed to survive. Spending time making cloth, farming implements, cookware, and numerous additional items took time away from establishing productive farms, making it difficult for Ohioans to provide for their families.
The War of 1812 helped convince even the most stalwart Democratic-Republicans that the United States needed to attain economic independence. Prior to the War of 1812, Americans had relied upon Europe, especially Britain, for manufactured goods. During the war, Americans faced shortages because Britain refused to trade with its enemy. The only way the United States could survive, many Americans came to believe, was by building factories to end America's dependence on Europe.
To help the United States develop factories, the American government implemented the Tariff of 1816. This tax provided the federal government with money to loan to industrialists. It also increased the cost of European goods in the United States. Rather than just absorbing the tax, European businessmen added the cost of the tax to the price of their items, thus making the American consumer pay for the tariff. Since American factories were just coming into existence during the early 1800s, United States businessmen could not produce items as cheaply in price as their European counterparts. The American factory owners passed the start up costs of building their plants to the consumers by charging more for their products. The Tariff of 1816 helped level the playing field for American businessmen. This tax made American and European manufactured goods comparable in price. By doing this, the United States government and businessmen hoped that the American consumers would buy domestic products before buying foreign items.
The Tariff of 1816 helped businesses in Ohio to compete with European factories. During the War of 1812, many Ohio businesses began production to replace English goods no longer accessible to Americans. In Cincinnati, several businesses flourished by the late 1810s, including a textile mill, several distilleries and breweries, a cotton mill, and at least one glass manufacturer. Ohio's abundance of raw materials, like lumber, coal, iron, and waterpower, aided industrialization in the state, but there were still several problems to overcome. Among these obstacles were a lack of skilled laborers, a poor transportation infrastructure, and competition from other nations' products. As Ohio's population grew and as the state invested in turnpikes, canals, and railroads, the first two problems declined in importance. The Tariff of 1816 helped the United States, including Ohio, to compete at least domestically with foreign products.