A tariff is a tax imposed by a government on goods imported from other countries, paid by the importer to the government of the importing country
. It is typically calculated as a percentage of the value of the imported goods (ad valorem tariff) or as a fixed amount per unit (specific tariff)
. Tariffs increase the cost of foreign products, making them more expensive compared to domestic goods, with the goal of encouraging consumers to buy local products and protecting domestic industries from foreign competition
. Tariffs serve several purposes:
- Generate government revenue
- Protect domestic industries by making imported goods more costly, thus reducing foreign competition and encouraging domestic production
- Address unfair trade practices such as dumping or subsidies by other countries that make their exports artificially cheap
- Act as political tools or leverage in trade negotiations
However, tariffs can also raise production costs for domestic industries that rely on imported materials, potentially leading to higher prices for consumers and disruptions in supply chains
. Economists generally agree that tariffs tend to harm economic growth and welfare, despite their protective intentions
. In summary, a tariff is a government-imposed tax on imports designed to protect domestic industries, raise revenue, and influence trade policies by making foreign goods more expensive relative to local products
