A Quick Look at Tariffs

A Quick Look at Tariffs

You have probably heard the term before but never known what it actually is: tariff. Well, a tariff is, essentially, a type of tax—sometimes called a “duty”–that has been assigned to the act of importing or exporting a particular class of goods. The term is most commonly used to describe the “tax” a government charges on sales conducted through the Clearit.ca import and export of goods across international borders. This revenue, though, is not just about making money; tariffs also help to restrict foreign competition at home.


Why Are Tariffs Important?

The main reason we need tariffs is not, actually, to make money on a tax (or, rather, for the government to make money on a tax). Tariffs help to keep foreign competition at bay. You see, a government will charge a country a tariff on goods they want to sell in America. The hope is that this will drive up the retail price so that consumers are more likely to buy goods made in their country instead of from their international competition.

On the other hand, the foreign trade restrictions often imposed by tariffs can reduce all foreign competition. This can then result in reduced domestic operations which can produce lower quality products (in an attempt to boost profit margins in the absence of competition). Indeed, if too many or too high of tariffs are imposed, domestic operations are not as pressured to guarantee the highest quality products at the best possible prices.

Other Reasons for Tariffs

While these are the fundamental reason for the existence of tariffs, here are few others:

  • Tariffs help to protect domestic jobs: When there is healthy foreign competition (and prices that follow), domestic production remains high as well
  • Tariffs help protect new and emerging industries: if a country wants to develop a new industry (product, service, agency, etc.), tariffs can ensure that foreign competition does not force out the infant businesses so they can thrive (again, helping to ensure employment and a healthy economy)
  • Tariffs help protect trade agreements: Sometimes, the government can impose a tariff to force a trade partner to adhere to trade regulations. For example, if an exporting country violates a trade agreement, the importing nation can charge a high tariff to cause that country’s product to fail in the domestic market
  • Tariffs protect consumers: if a government feels that a product from another country could be harmful, raising the price on it can discourage consumers from purchasing it
Category Business

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