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In light of the economic chaos and diverging currencies, trade among the states plummeted, thereby thinning the economic tether that bound the largely independent states. In a vicious spiral, the not-so-united states competed with one another for their share of diminishing economic resources. Seeking to protect their citizens from this competition, the states imposed tariffs on goods from their sister states. But this ended up hurting citizens on both sides of the border.
For example, New York had long been supplied with firewood from Connecticut’s bountiful forests. But in these difficult times, the New Yorkers decided to keep their hard-earned dollars from flowing “into the pockets of detested Yankees.” John Fiske,
The Critical Period of American History, 1783–1789
(Boston: Houghton, Mifflin & Co., 1898), 173. And so New York slapped a protective tariff on all ships arriving from Connecticut. These ships from the neighboring state were required to pay entrance fees and clear customs, just like ships from London. “Great and just was the wrath” of the Connecticut lumbermen. In fact, the tariff so damaged the Connecticut economy that the state held a large meeting of businessmen, who decided to suspend all trade with the “hated state” of New York. Ibid. (Fiske exaggerates the level of animosity. There was certainly resentment, but “hate” is strong, although it provides good color.) Both economies wound up worse off, as both lost a market for their goods.
The trade war hurt not only the producers but also the consumers in both states. The tariffs relieved competition on the local producers, thus allowing them to raise their prices. For example, New York producers, sheltered by tariffs, could raise their prices without having to worry about their customers buying from cheaper Connecticut producers instead. In this way, local consumers often ended up paying more.