Tariff

Tariff is a tax or duty to be paid on a particular class of imports or exports. It is a form of regulation of foreign trade and a policy that taxes foreign goods to encourage or protect domestic industry. Tariffs are among the most widely used instruments of protectionism, along with import and export quotas.

History

The term tariff has its origins in the Arabic word ta'rif, which means "notification" or "announcement". Tariffs have been used throughout history to control the amount of foreign goods entering a country and to raise revenue. The first tariffs were used in the 18th century in Europe, and have since been used worldwide.

Types of Tariffs

There are several types of tariffs, including:

• Ad valorem tariff: A fixed percentage of the value of the good that is being imported. This is the most common type of tariff.

• Specific tariff: A fixed fee for each unit of the good that is imported.

• Compound tariff: A combination of the ad valorem and specific tariffs.

Effects of Tariffs

Tariffs can have several effects on a country's economy. They can:

• Protect domestic industries: By making foreign goods more expensive, tariffs can encourage consumers to buy domestic goods.

• Raise government revenue: Tariffs can be a source of revenue for the government.

• Reduce competition: By making foreign goods more expensive, tariffs can reduce competition for domestic industries.

However, tariffs can also have negative effects. They can:

• Increase prices for consumers: Because tariffs increase the cost of importing goods, they can lead to higher prices for consumers.

• Hurt domestic industries that rely on imported goods: If a country imposes tariffs on raw materials, it can hurt domestic industries that rely on those materials.

• Lead to trade wars: If one country imposes tariffs, other countries may retaliate with their own tariffs, leading to a trade war.

See Also

• Trade policy
• Protectionism
• Import quota
• Export quota

References

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