The German tariff of 1879 was a protectionist law passed by the Reichstag (under the guidance of Chancellor Otto von Bismarck) that imposed tariffs on industrial and agricultural imports into Imperial Germany.
Background
Following the end of the Napoleonic Wars in 1815, Prussia had adopted low tariffs (including for grain) and these became the basis of the Zollverein tariff of 1834. In 1853 the duties on grain were abolished and in 1862 the commercial treaty with France (along with similar treaties with other states) substantially reduced the duties for manufactured goods. The Treaty of Frankfurt of 1871 established most favoured nation status between Germany and France. In 1873 free trade won its last victory in Germany with the abolition of the duty on iron. Tariffs were now for raising revenue and not for protective purposes, with the German Empire therefore almost a completely free-trading state. In 1850 two-thirds of Germany was employed in agriculture and this proportion declined slowly until 1870. During the 1850s and 1860s Germany was a net exporter of grain and its farmers opposed tariffs for industry as this might have led to reprisals by Britain against German grain. However, industrialists favoured tariffs against British goods to safeguard their infant industries and they therefore came to believe that winning over the farmers to protectionism was crucial.
After the Franco-Prussian War of 1871, France had to pay an indemnity to Germany. A considerable portion of the indemnity was paid in bills of exchange and in gold. This gave impetus to industry but it also led to over-production: the number of joint-stock companies in Prussia in 1870 was 410, with total capital of three milliard marks; by the end of 1874 there were 2,267 companies with capital amounting to seven and one-third milliards. The Panic of 1873, however, led to a depression, with low prices in Germany temporarily shielding it from foreign competition. Although prices began to rise with the subsequent economic recovery, this recovery was hampered by British manufacturers dumping their goods on the German market. German manufacturers renewed their demand for protection, with the textile and iron industries the most strongly in favour.
In the late 1870s world grain prices started to fall due to the opening up of the American prairies to cultivation following the settlement of the Midwest after the Civil War. The increase in railways also helped cheapen grain (which also aided Russian farmers). German grain started to lose ground and Germany became a net importer of wheat and rye. Agricultural labourers were migrating to the towns to find work in industry and landowners began to favour protection. The Prussian landowner Guido Henckel von Donnersmarck complained to Heinrich von Tiedemann about the sixfold increase in American grain, flour and meat exports "in truly unbelivable numbers, for German agriculture, there must be a grain, flour and meat tariff as an unconditional necessity if we are not to expose it to the same fluctuations as industry".
In 1876 both the Association of Tax and Economic Reformers (consisting mostly of large landowners) and the Central Association of German Industrialists were founded and in 1878 they combined to pressure the government into protecting both agriculture and industry. This coalition of interests into a solidarity bloc was called the marriage of iron and rye or the alliance of steel and rye. The autumn of 1878 witnessed a high-point in their protectionist campaign and in the Reichstag 204 deputies (including 87 Centrists, 36 Conservatives and 27 Liberals) formed a cross-party association in favour of protection. In October 1878 the Centre Party announced its support for protection. On 24 February 1879 the organisation of the largest 250 landowners—the Congress of German Landowners—also adopted protectionism. However, the Socialist Congress held in Gotha in 1876 declared that "the Socialists of Germany are indifferent to the controversy raging in the proprietary classes as to Protection and Free Trade; the problem is a practical one, and must be so considered in each particular case".