Tariffs are taxes imposed by a government on goods and services imported from other countries. They are usually calculated as a percentage of the value of the imported goods or as a fixed amount per unit (specific tariff)
. The importer pays the tariff to their government when bringing the foreign goods into the country
. Governments impose tariffs for several reasons:
- To raise government revenue
- To protect domestic industries by making imported goods more expensive, encouraging consumers to buy local products
- To correct trade imbalances and reduce trade deficits
- As political tools in trade negotiations or to pressure other countries on issues like immigration or unfair trade practices
Tariffs can have mixed economic effects. While they may help domestic industries by reducing foreign competition, they can also increase production costs if domestic producers rely on imported materials. This can lead to higher prices for consumers and potentially harm the industries tariffs aim to protect
. Economists generally agree that tariffs tend to reduce economic growth and welfare, although they may provide short-term protection to certain sectors
. In summary, tariffs are import taxes used to generate revenue, protect local industries, and influence trade policies, but they often lead to higher prices and economic inefficiencies
