Question

how trade barriers can affect the economy. Why do you think we have such barriers?

Answer 1

Trade barriers are created to keep out foreign imports and encourage the demand of domestic goods. This happens as a tariff is imposed on foreign goods which make them very expensive to buy for domestic residents. This helps to improve the trade balance at home and protect domestic industries against foreign competition. While this is a good strategy as it protects the domestic industries, it can cause a problem of retaliation from the countries facing the brunt of the trade barriers. This can cause problems with economic growth in the future for both countries if such retaliatory measures occur. Thus trade barriers are sound and helpful ways of protecting the domestic economy but can have some repercussions both in the short run and the long run.