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Overview of Tariff
Definition of
Tariff
What is a Tariff? A Tariff is a tax or duty imposed by a government on goods and services imported from other countries (import tariff) or, less commonly, on goods and services exported to other countries (export tariff). Tariffs increase the price of imported goods, making them less attractive to domestic consumers and businesses, thereby potentially protecting domestic industries from foreign competition. They also serve as a source of revenue for the imposing government and are a tool of international trade policy.
Activities Related to
Tariff
Here is a list of Tariff related activities:Â Governments setting tariff rates on specific imported goods, Importers paying tariffs to customs authorities upon entry of goods into a country, Businesses calculating the landed cost of imported goods (including tariffs), Consumers paying higher prices for goods subject to tariffs, Domestic producers potentially benefiting from reduced foreign competition, and Nations negotiating trade agreements to reduce or eliminate tariffs.
The Importance of
Tariffs
Tariffs are important because they can significantly impact international trade flows, the cost of goods, consumer prices, and the competitiveness of domestic industries. Governments may use tariffs to protect nascent industries, retaliate against unfair trade practices by other countries, or generate revenue. However, tariffs can also lead to higher prices for consumers, reduced choice, and retaliatory tariffs from other countries, potentially harming export-oriented industries and overall economic efficiency. Understanding tariffs is crucial for businesses involved in international trade and for analyzing trade policy.
Key Aspects of
Tariff
Tax on Imports/Exports
Most commonly applied to imported goods to make them more expensive in the domestic market.
Types of Tariffs
Can be ad valorem (a percentage of the good's value) or specific (a fixed amount per unit of the good).
Protectionist Measure
Often used to shield domestic industries from foreign competition by raising the price of imported alternatives.
Source of Government Revenue
Tariffs contribute to the revenue of the imposing government.
Concepts Related to
Tariff
A Tariff is a type of Indirect Tax on internationally traded goods. It is a key instrument of trade policy and can affect the Law of Supply and Demand by altering the price and quantity of imported goods. Tariffs are distinct from quotas (which limit the quantity of imports) and other non-tariff barriers to trade. They influence the Cost of Goods Sold (COGS) for businesses that import materials or finished products.
Tariff
in Action:
The Adventures of Coco and Cami
Cami wants to import special coffee beans from another country, but learns there's an extra tax she has to pay when they arrive. This makes the beans more expensive for her shop.
Professor A explains that this extra tax on imported goods is called a Tariff, and how it can affect the price of things businesses bring in from other countries.