Charles Townshend, Chancellor of the Exchequer under William Pitt, had been a proponent of colonial administrative reform since his tenure on the Board of Trade in the 1750s. After the collapse of the Rockingham ministry, Townshend eyed the colonies as an alternate source of imperial revenue that would allow him to reduce the British Land Tax.

The resulting Townshend Acts imposed duties on glass, paint, lead, paper, and tea imported into the colonies. Townshend earmarked anticipated revenue to fund the salaries of governors and other colonial administrators. It was a conscious effort to shift the balance of power in colonial government; by liberating royal officials from their financial dependence on American legislatures, Townshend hoped to eliminate the most tangible obstacle preventing regular enforcement of parliamentary laws and royal directives.

Townshend also reorganized the Customs Service under the Revenue Act of 1767, creating a Board of American Customs Commissioners in Boston and four new Vice-Admiralty courts in Boston, Philadelphia, Charlestown, and Halifax.

During the Stamp Act debate, many colonial commentators, including Benjamin Franklin, had attempted to delineate the spheres of influence between Parliament and local legislatures by distinguishing "external" from "internal" taxation. This distinction collapsed once the colonists realized that Townshend’s "external" taxes on imports, rather than regulating commerce, strove to raise revenue much like the "internal" Stamp Act had. The fact that the duties imposed were moderate did not mollify the critics. Their supposedly innocuous nature, argued John Dickinson in Letters From a Farmer in Pennsylvania, masked the true perniciousness of the taxes:

"Nothing is wanted at home but a PRECEDENT, the force of which shall be established by the tacit submission of the colonies . . . IF Parliament succeeds in this attempt, other statutes will impose sums of money as they choose to take, without any other LIMITATION than their PLEASURE."

The Sons of Liberty and other colonial leaders resorted once more to a non-importation/non-consumption strategy to coerce Parliament into repealing the Townshend Act. Though embraced less rapidly than in 1765, the boycott took hold throughout the colonies. By 1769, colonial exports exceeded imports by over £800,000.

The burden of mercantile debt in many regions, especially the Chesapeake, reinforced ideological misgivings concerning imperial tax policy. Planters in Maryland and Virginia owed millions to British creditors, including many yeoman who, before 1740, rarely flirted with foreign indebtedness. Now, trading posts affiliated with Scottish merchant houses extended credit to thousands of small farmers, embroiling them in a transatlantic trading system. Such economic burdens accentuated colonial resistance to British tax policies.

Responding again to economic hardship and merchant petitions, the ministry under Lord North repealed the Townshend duties, reasoning that it was contrary to the principles of mercantilism for Britain to tax its manufactured exports to America. As a symbolic gesture, however, North retained a small duty on tea. The compromise successfully eased tensions for the moment.