Question

1. Why are tariffs discouraged in international trade transactions?
2. Under what conditions will tariffs be necessary?

Answer 1

Tariffs in the market leads to deadweight loss and reduce the consumer surplus, it also allows the inefficient producers in the market to produce the goods who will be taken out by the competition in the market at the world price, overall tariff lead to wastage of resources and harm the economy overall.

If the foreign companies are dumping in the local market then tariff are necessary, dumping in the local market will lead to redcution in the competition and in the long run it will harm the consumers more, so tariffs become important in such cases.