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Tariff

What is a 'Tariff'

A tax imposed on imported goods and services. Tariffs are used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers. A specific tariff is levied as a fixed fee based on the type of item (e.g., $1,000 on any car). An ad-valorem tariff is levied based on the item’s value (e.g., 10% of the car’s value). Tariffs provide additional revenue for governments and domestic producers at the expense of consumers and foreign producers. They are one of several tools available to shape trade policy.

Explaining 'Tariff'

Governments may impose tariffs to raise revenue or to protect domestic industries from foreign competition, since consumers will generally purchase foreign-produced goods when they are cheaper. While consumers are not legally prohibited from purchasing foreign-produced goods, tariffs make those goods more expensive, which gives consumers an incentive to buy domestically produced goods that seem competitively priced or less expensive by comparison. Tariffs can make domestic industries less efficient, since they aren’t subject to global competition. Tariffs can also lead to trade wars as exporting countries reciprocate with their own tariffs on imported goods. Groups such as the World Trade Organization exist to combat the use of egregious tariffs.


Further Reading


Electricity economics: Essays and case studies
www.osti.gov [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …

Efficient tariff financing of public goodsEfficient tariff financing of public goods
www.sciencedirect.com [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …

The public finance of a protective tariff: The case of an oil import feeThe public finance of a protective tariff: The case of an oil import fee
www.jstor.org [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …

Financing renewable energy in Indonesia: a CGE analysis of feed-in tariff schemesFinancing renewable energy in Indonesia: a CGE analysis of feed-in tariff schemes
www.tandfonline.com [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …

Minimum feasible tariff model for BOT water supply projects in MalaysiaMinimum feasible tariff model for BOT water supply projects in Malaysia
www.tandfonline.com [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …

Financing of higher education and the role and dilemmas of tariff groupsFinancing of higher education and the role and dilemmas of tariff groups
www.inderscienceonline.com [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …

Tax-tariff reform with costs of tax administrationTax-tariff reform with costs of tax administration
link.springer.com [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …

Optimal pricing with a budget constraint--The case of the two-part tariffOptimal pricing with a budget constraint--The case of the two-part tariff
www.jstor.org [PDF]
… The chapters following an introductory chapter are Economics, Finance, and Equity in Tariff Policy; Electricity Tariffs in Thailand; Electricity Tariffs in Tunisia; Electricity Tariffs in Sudan; An American Tariff Structure; Rural Electrification in Developing Countries; Electricity …



Q&A About Tariff


What is a tariff?

A tax imposed on imported goods and services.

Is there anything else you would like us know about Tariff ?

Yes,

When economists say that tariffs protect domestic producers from foreign competition, what do they mean by this statement?

They mean that protectionist policies such as high taxes on imported goods help domestic producers compete against foreign competitors who may produce similar products at lower costs than their American counterparts.

Why might governments impose tariffs to raise revenue or protect domestic industries from foreign competition?

Governments may impose tariffs to raise revenue or to protect domestic industries from foreign competition because consumers will generally purchase foreign produced goods when they are cheaper. Consumers are not legally prohibited from purchasing foreign produced goods but tariffs make those goods more expensive which gives consumers an incentive to buy domestically produced goods that seem competitively priced or less expensive by comparison. Tariffs can make domestic industries less efficient since they aren't subject to global competition and can lead to trade wars as exporting countries reciprocate with their own tariffs on imported goods. Groups such as the World Trade Organization exist to combat the use of egregious tariffs."'

What does it mean when economists say that tariffs raise revenue for the government?

It means that tariffs can be used to raise revenue for the federal government.

What is a trade war ?

A trade war occurs when one country imposes a tariff in retaliation for another country's tariff imposition .

How do specific tariffs work?

They are levied as fixed fees based on the type of item (e.g., $1, on any car).

When economists say that tariffs restrict imports, what do they mean by this statement?

They mean that tariffs restrict imports into the country in which they are imposed.

Why did America pursue protectionist policies during much of its history up until World War II ?

Because many Americans believed in protecting certain industries from foreign competition in order to encourage growth and development of those industries within US borders .

How do ad-valorem tariffs work?

They are levied based on the items value (e.g., $1, of the cars value).

Who created WTO ?

The General Agreement on Tariffs and Trade (GATT) was established in 1947 after World War II by 23 nations including Canada , France , Germany , Italy , Japan , United Kingdom and United States . It was signed at Geneva Switzerland . GATT was designed to promote international free trade by reducing import duties between member nations . In 1995 it became part of WTO .

What are two types of tariffs?

Specific and ad valorem.

Why do tariffs serve as a protective barrier for infant industries?

Tariffs serve as a protective barrier because they allow domestic producers to compete with foreign producers without being overwhelmed by cheaper foreign goods.

How have tariffs historically served the United States?

Tariffs have historically served as a protective barrier for infant industries and to generate revenue for the federal government.

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