Tariff Quiz PDF

Tariffs What is a tariff? A tariff is a tax placed on an import to increase its price and decrease its demand Tariffs can be imposed by governments to raise revenue and to restrict imports A tariff is likely to raise the final price to the consumer, therefore a fall in demand for...

Tariffs What is a tariff? A tariff is a tax placed on an import to increase its price and decrease its demand Tariffs can be imposed by governments to raise revenue and to restrict imports A tariff is likely to raise the final price to the consumer, therefore a fall in demand for the goods Consumers will switch consumption to domestic goods (see BBC article) Tariffs: impact on business Imposing a tariff will help a country to: Protect their fledgling (new) domestic industries from foreign competition Protect their ageing and inefficient industries from foreign competition However: If a business faces having to pay stiff tariffs they may have to reduce production and this can mean job losses Tariffs – 3 reasons they are imposed #1 To raise tax revenue Poorer countries may impose heavy tariffs on imports to raise much needed funds for healthcare and education #2 For environmental reasons Tariffs are sometimes only placed on goods that have negative externalities e.g. cigarettes (sin tax) #3 Protectionism – see the video Benefits of tariffs Domestic produced goods do not incur the tariff and so are likely to be cheaper Tariff protection allows domestic businesses to sell more because they gain a price advantage compared to imports It can ensure better job security Tariffs can be reduced in strategic trade deals Drawbacks of tariffs Some products, even with tariff costs added, do not put off potential customers willing to pay for unique or unusual imported products Tariffs may just increase the costs to consumers Other countries may retaliate by imposing their own tariffs on imports