The ability of Danish St. Croix’s planters to shift between molasses and rum exports depending on trade policies was key to the island’s long-term economic success in the sugar trade.
- High molasses tariffs (like under the British Molasses Act of 1733) pushed planters to distill more rum locally for export.
- High foreign rum tariffs (in Britain and its colonies) encouraged molasses exports instead of rum.
- Smuggling played a major role, allowing Danish molasses and rum to reach North American markets despite tariffs.
1. The Role of Tariffs in the Molasses Trade
- British Tariffs & The Molasses Act (1733):
- Britain passed the Molasses Act of 1733, which taxed foreign molasses at 6 pence per gallon when imported into the British American colonies.
- This was meant to discourage imports from non-British Caribbean colonies, including Danish St. Croix, and instead force the colonies to buy from British sugar islands (Jamaica, Barbados, etc.).
- However, the tax was largely ignored, and smuggling Danish West Indies molasses into New England became common.
- The Sugar Act (1764) – Higher Enforcement:
- The British reduced the molasses tax to 3 pence per gallon but strictly enforced it, making smuggling riskier.
- This increased demand for legal British molasses, slightly reducing Danish St. Croix’s molasses exports to the American colonies.
2. The Role of Tariffs in the Rum Trade
- Danish Trade Policies:
- Denmark imposed low tariffs on rum exports, encouraging St. Croix’s sugar estates to distill rum locally rather than exporting raw molasses.
- This made rum exports more profitable than molasses, particularly for shipments to Denmark and other European markets.
- British Tariffs on Foreign Rum:
- Britain imposed high tariffs on non-British Caribbean rum, making it difficult for Danish St. Croix to export to British colonies.
- This limited St. Croix’s rum trade with British markets but encouraged smuggling into North America.
- U.S. Tariffs After Independence (1783):
- After the American Revolution, U.S. tariffs on foreign molasses and rum varied.
- In some periods, U.S. merchants favored Danish molasses over British molasses due to trade restrictions with the British Caribbean.
3. Economic Shifts Due to Tariffs
- Molasses vs. Rum Decision:
- When tariffs on molasses were low, St. Croix’s planters exported more molasses to distilleries in New England.
- When tariffs on molasses increased, more planters produced rum locally and exported it directly to Europe or smuggled it into other markets.
- Impact on Danish Trade Policy:
- Denmark generally favored free trade for rum and low taxes on molasses exports, making St. Croix a major supplier of both products depending on market conditions.