Question

What is a tariff? How does it impact the market? Who gains and who loses from a tariff? Tariffs have been in the news a lot lately. Can you find articles on each side of the argument (one for tariffs, and one against)?

Answer 1

Tariffs refer to the tax on import and export of country. Usually, tariffs are imposed on import of country.

Gains from Tariffs:

• Government receives revenue in form of tax collection.
• Domestic producers witness rise in their selling. so profit rises.

Loss from tariffs:

• Consumer tends to pay higher price goods and services, thus consumer surplus falls.
• Importers also face higher price of raw material.

Advantages of Tariffs:

• it leads to rise in domestic output.
• Domestic extra employments opportunities are created.
• Infant domestic industries are protected through the tariffs.

Disadvantages of tariffs:  

• Tariffs leads to inefficiencies in economic system.
• Counteractions by other countries might affect export negatively.
• Tarrifs lead to fall in consumer surplus and inflation rises rapidly.
• Over the long run, export becomes less competitive.