Question

Tariffs are currently in the news. What are tariffs? What affect do tariffs have on exchange rates? Has the U.S. dollar strengthened or weakened since tariffs were introduced?

Answer 1

A tariff is a tax on imports or exports. Money collected under a tariff is called a duty or customs duty. Tariffs are used by governments to generate revenue or to protect domestic industries from competition. Tariffs are used to restrict imports by increasing the price of goods and services purchased from overseas and making them less attractive to consumers There are generally two types of tariffs. Ad valorem tariffs are calculated as a fixed percentage of the value of the imported good. When the international price of a good rises or falls, so does the tariff. A specific tariff is a fixed amount of money that does not vary with the price of the good. In some cases, both the ad valorem and specific tariffs are levied on the same product.

Tariff hike will always result in a home currency appreciation