What are Tariffs?
Tariffs are taxes or duties imposed on imported goods and services by a country’s government. They are used to regulate trade, protect domestic industries, and generate revenue for the government.
Types of Tariffs
- Ad valorem tariffs: Based on a percentage of the value of the imported goods.
- Specific tariffs: A fixed amount per unit of the imported goods.
- Compound tariffs: A combination of ad valorem and specific tariffs.
Benefits of Tariffs
1. Protecting domestic industries from foreign competition.
2. Generating revenue for the government.
3. Correcting trade imbalances.
Drawbacks of Tariffs
1. Increase prices for consumers.
2. Retaliation from trading partners.
3. Distortion of global supply chains.
Example of Tariffs
In 2018, the US imposed tariffs on steel and aluminum imports from several countries, leading to a trade war with China and the European Union.
Case Study: US-China Trade War
The US-China trade war, which started in 2018, involved the imposition of tariffs on billions of dollars worth of goods by both countries. The trade war led to disruptions in global supply chains and negatively impacted the economies of both countries.
Statistics on Tariffs
According to the World Trade Organization, the average applied tariff rate for all products in 2019 was 10.7%.
