Title: Cray: Negative effects of tariffs
Headings: Cray: Negative effects of tariffs
Cray: Negative effects of tariffs
Content: Second, another reason for an increase in prices is that domestic producers will take advantage of the situation and raise their prices. In other words, there will be less competitive pressure to keep their prices low. Historically, domestic producers have opted to increase their profit margins over gaining market shares. In addition, less competition reduces the incentive to innovate and to improve existing products. The automobile industry is an excellent example of these outcomes. Third, when country A raises its trade barriers, like tariffs or quotas, its trading partners will most assuredly retaliate. This will curtail the exports of country A. Exporting industries in country A will see a drop in demand for their products and it will not be long before these industries start laying off people and negating much of the employment gains from protectionist policies. Fourth, if country A raises tariffs on country B’s products, country B will have less income to spend on country A’s exports. Again this will have a negative impact on country A’s employment, and its overall economy. Fifth, tariffs protect inefficient domestic industries at the expense of efficient industries and this situation will create an internal misallocation of resources.