Tariffs: International Trade and Tariff Essay

2194 Words Sep 3rd, 2014 9 Pages
How do government tariffs impact on imported goods? What are the pros and cons of these tariff and what are the likely future trends.

Tariff is tax that a government collects on goods coming into a country. It is a tax which is levied on imports across national boundaries or other geographical regions and exports in a few cases (Lv, 2000). Originally, applying tariffs was first based on financial purpose, so it is a regular but most significant source of fiscal revenue to governments. Generally, a country with strong economy and lying in an advantageous position tends to pursue a free trade policy. At that time, the principal function of tariffs is tax collection. By contrast, a country with weak economy and lying in a disadvantageous
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It may help to improve Carbaugh’s theory that imported goods make them more expensive compared with similar products made by the nation's domestic producers. For example, “If tariff rate is a 20 percent for domestic ad valorem and the imported product price is $200, the duty is $40. If the product’s price increases, say, to $300, the duty collected rises to $60; if the product price falls to $100, the duty drops to $20” (Carbaugh, 2003, p108). Therefore, Moore and Morris (2012) further explain that a nation imposes tariffs on imported goods to make them costlier and to protect domestic producers and employees making those same products, if imported Product A is more expensive than domestically produced Product A1. Assuming that all other conditions are equal, they discover that consumers tend to choose Product A1.

Moreover, one of the most distinct advantages of tariffs is that governments can be benefited from adjusting the economic growth rate. Economists tend to regard tariffs on imports as an economic leverage to adjust the development of production and economy, and they discover that a number of high tariff countries are high growth countries (Lv, 2000; Wacziarg 2001). Firstly, Lee (2011) argues that the growth rate is raised by a higher tariff. A higher import tariff on the consumer goods in the domestic country may boost (reduce) the long-run economic growth rate when the foreign (domestic) country has an absolute advantage in the investment good. The

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