The need of a reduction of revenue pressed with such urgency that a tariff measure was enacted March 3, 1857,lowering many of the duties and enlarging the free list. The schedules of 1846 were taken as a basis and the following principle was applied : upon articles enumerated in schedules A and B rates were reduced from 100 per cent. and 40 per cent. to 30 per cent.; on articles in schedule C from 30 per cent. to 24 per cent.; in schedule D from 25 per cent. to 19 per cent.; in schedule E from 20 per cent. to 15 per cent.; in schedule F from 15 per cent. to 12 per cent.; in schedule G from 10 per cent. to 8 per cent.; in schedule H from 5 per cent. to 4 per cent.; and on articles not specifically provided for from 20 per cent. to 15 per cent. In the application  of this principle some exceptions were made; many drugs and dry stuffs, articles used in chemical arts, raw silk, tin, and wood were placed upon the free list or else transferred to lower rate schedules; cotton manufactures were favored by leaving the cotton duties nearly as high as established by the tariff of 1846.

Hardly had the tariff of 1857 been enacted when a sharp ,commercial and banking panic came on, which for a period almost paralyzed manufactures; in August, 1857, the Ohio Life Insurance and Trust Company failed with large liabilities to Eastern institutions; a panic occurred in New York, followed by a suspension of specie payments. Important railroads reaching into undeveloped sections of the West went into bankruptcy, among them the Illinois Central, the New York and Erie, and the Michigan Central. The reason for the crisis of 1857 is still the subject of controversy: one alleged cause is the lowering of tariff duties in 1857 ; and some protectionists trace the collapse to the slow but poisonous workings of the tariff of 1846, — the argument being that the reduction of duties stimulated importations, which had to be paid for in specie, and that this drain of specie inevitably caused the panic.

This point of view is set forth by Mr. Elaine in his " Twenty Years of Congress " " The protectionists therefore hold that the boasted prosperity of the country under the tariff of 1846 was abnormal in origin and in character. It depended upon a series of events exceptional at home and even more exceptional abroad, — events which by the doctrine of probabilities would not be repeated for centuries. When peace was restored in Europe, when foreign looms and forges were set going with renewed strength, when Russia resumed her export of wheat, and when at home the output of the gold mines suddenly decreased, the country was thrown into distress, followed by a panic and by long years of depression. The protectionists maintain that from 1846 to 1857 the United States would have enjoyed prosperity under any form of tariff, but that the moment the exceptional conditions in Europe and in America came to an end the country was plunged headlong into a disaster from which the conservative force of a protective tariff would in large part have saved it."

Other forces can be discovered in this period which were destined to bring disaster. There had been an exceedingly rapid industrial development, occasioned by railroad construction out of all proportion to immediate demands and by the stimulus of enormous additions to the monetary medium resulting from the new gold discoveries. Speculation was rampant and credit was once more strained to the utmost. The bank-note circulation which in 1843 was $58,000,000 amounted in 1857 to $214,000,000; and loans had increased from $254,000,000 to $684,000,000. It is too much to claim that this wide-spread shock was due to the tariff of 1857 which had been in operation but for a few months, or even to the tariff of 1846. To be sure imports had increased and there had been a heavy export of specie to pay for them, but at the same time the production of specie in the United States had been more than enough to cover this demand and to leave a generous amount in the country for domestic needs. It was certainly unfortunate that a reduction of revenue should have been made at a time when, as events proved, the government treasury was about to need special strengthening; but in connecting cause and effect it must be borne in mind that commercial depressions have for a century returned with an almost mathematical regularity, and that it is hardly reasonable to hold alone responsible a tariff which had apparently brought no disturbance during a period of ten years.