Tariff

Written by Fmi.Online Friday November 11, 2022
A tariff is a protectionism tax imposed on imported and exported goods with the aim of generating government revenues and protecting the domestic economies and infant industries from global competition.

Explanation :

Tariffs are a trade policy tool that seeks to generate additional revenue for governments and domestic producers. Import and export taxes inflate the prices of imported goods, causing a decline in imports and shifting consumers to the consumption of domestic goods.The price increase in the imported goods encourages domestic producers to increase the output of production, thus realizing higher revenues. On the other hand, the shift of resources to domestic industries restricts free trade, as domestic producers may be more efficient than foreign producers. Furthermore, tariffs are viewed as a tool for transferring money to the government through higher consumer prices and higher producer revenues.

In a nutshell :

  • Governments impose tariffs to raise revenue, protect domestic industries, or exert political leverage over another country.
  • Tariffs often result in unwanted side effects, such as higher consumer prices.
  • Tariffs have a long and contentious history and the debate over whether they represent a good or bad policy rages on to this day.
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