Tariff Advantages And Disadvantages

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Introduction Tariff is the taxes and duties that imposed on the imports and exports of a country in international trade. These are the general law for the protection of domestic manufacturer. Tariffs imposed on the imports and exports increase the cost of the foreign trade which acts as a competitive advantage for the local business. A tax structure is a set of rules and conditions that determine the monetary bills on the goods and services.
Advantages of Tariffs There are several benefits of tariff for the domestic employer; tax equals the local business with foreigners that results as reduction in price war, tax give a competitive advantage to the developing countries and so many which are as under:-
No Risk of Price War Different countries
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International negotiations results in the mutual benefits of the countries, for example, one country have the shortage of milk but have vast resources of coal and another country has vast resources of milk but the lack of fuel. Now due to tariffs none of them can take the service so that taxes will act as a negotiation factor and results in the mutual benefits of the both countries.
Comparative Advantage to Domestic Trade Law of comparative advantage also implies on the domestic trade. The local trader wants to maximize his revenue and sales from the output in the home. Now when he is in such a state that he could export his product into the foreign market at the relatively low price then, he will get a comparative advantage over others due to the tariff prevails in the country (Stern, 2011).
Disadvantages of Tariff For domestic country and his trade taxes are beneficial but for the world economy and customers it has several disadvantages. Some of them are as follow:-
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It is a customer who is forced to pay that price because taxes paid by company results as an increase in the cost of the product. The mathematical equation will be as “Price paid by customer minus original price fixed by manufacturer minus government tariffs equals’ variance.” So whenever a client purchases a foreign product he is paying something extra to the government. If the demand for a product is higher in the country than tariff gives the reason to the manufacturer to increase the cost of the product (Nivola, 2010).
Barrier to Trade Tariff sometimes acts as a barrier to trade; modern era is the era of the free trade. Free trade gives more business and revenue in a country as compared to tariffs. By understanding this, some countries have started free trade among them by making a group such as NAFTA (North American Free Trade Area), EU and SAARC, etc. Tariff becomes a barrier to the foreign trade of a country. Many countries have started moving their policies from the duty to free trade.

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