A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Tariffs can be fixed (a constant sum per unit of imported goods or a percentage of the price) or variable (the amount varies according to the price) . The purpose of a tariff is to make foreign-produced goods more expensive, so that domestically produced alternatives seem more attractive. Tariffs can be used to:
- Raise revenue for the government.
- Regulate foreign trade and policy.
- Protect domestic industries, especially nascent ones, from foreign competition.
- Reduce pressure from foreign competition and reduce the trade deficit.
Tariffs can be specific (levied as a fixed fee based on the type of item) or ad valorem (levied based on the items value) . Tariffs can increase the price of goods and services purchased from another country, making them less attractive to domestic consumers. The distributional effects of a tariff tend to be regressive, burdening lower-income households more than higher-income households.
