Its most important additions to the power of Congress were those relating to finance and commerce: it enabled the federal government to levy taxes, regulate trade, coin money, protect industry, and direct the settlement of the West, and, as later events proved, to establish credit and redeem its securities.
[3] In the months leading up to the passage of the Tariff Act, Congress received several petitions from different cities representing manufacturing groups asking for relief from the flood of European imported goods.
James Madison modified the terms of the tariff to balance sectional conflicts[4] but conceded that articles subject to high duties "were pretty generally taxed for the benefit of the manufacturing part of the northern community.
"[5] He acknowledged the South, the main wealth-producing part of the nation, would inevitably "shoulder a disproportionate share of the financial burden involved in the transforming the United States into a commercial, manufacturing, and maritime power.
"[6] In its final form, the tariff erected "an American navigation system," superseding the individual state sanctioned fees designed to protect domestic shipping during the Articles of Confederation period from 1781 to 1789.
[5][7] The act established tonnage rates favorable to American carriers by charging them lower cargo fees than those imposed on foreign boats importing similar goods.
[9] In addition, provisions of the treaty had gone unfulfilled, including compensation to slaveholders for slaves emancipated by the British Navy during the War and the failure to abandon military posts in the Northwest Territory.
Representative James Madison, presiding over the tariff debates in Congress, attempted to introduce discriminatory provisions into the tonnage legislation that would favor France and its colonial possessions and shift American trade away from Great Britain.
[11] Madison's proposals were intended to unify politically the agricultural and manufacturing interests in support of that commercial realignment at the national level, damaging to Great Britain and beneficial to revolutionary France.
[12] Many representatives of northern business were wary of abandoning Great Britain as their primary trading partner and merchant marine and questioned whether France could ever act "as the principle supplier and market for the United States.
[20] Firstly, British capital and markets contributed to the general prosperity of the North, and secondly, a shift towards France would mean aligning the United States with a revolutionary government that exhibited what Federalist leadership regarded as "an excess of democracy.
"[21][22] Alexander Hamilton, soon to enter the executive branch as Secretary of the Treasury, declined to support Madison's proposal and warned that economic warfare with Great Britain would drastically reduce the import duty revenue that the tariff legislation called for, placing at risk the funds anticipated to run the new federal government and finance the national debt.
"[22] In the South, "agricultural interests" viewed the high tariff and tonnage rates as a triumph for northern merchants and manufacturers, the burden of which fell on southern staple crop exporters.
[20] This early application of constitutional authority highlighted north-south social and economic differences and presaged the dissolution of the Federalist coalition, the formation of an agrarian alliance,[22][24] and the rise of the First Party System.