Title: Barriers to Trade | Boundless Economics
Headings: Barriers to Trade
Barriers to Trade
Tariffs
Learning Objectives
Key Takeaways
Key Points
Key Terms
Types of Tariffs
Consequences of Levying a Tariff
Quotas
Learning Objectives
Key Takeaways
Key Points
Key Terms
Types of Quotas
Reasons to Implement Quotas
Consequences of Quotas
Other Barriers
Learning Objectives
Key Takeaways
Key Points
Key Terms
Specific Limitations to Trade
Customs and Administrative Procedures
Government Participation
Technical Barriers to Trade

Content: Consequences of Levying a Tariff
To see the effects of levying an import tariff, consider the example shown in. Assume that there is an import tax levied on a good in a domestic country, Home. The domestic supply of the good is represented by the diagonal supply curve, and world supply is perfectly elastic and represented by the horizontal line at P w P w. Before a tariff is levied, the domestic price is at P w P w, and the quantity demanded is at D D (with quantity S S provided domestically, and quantity D−S D − S imported). Effects of a Tariff: When a tariff is levied on imported goods, the domestic price of the good rises. This benefits domestic producers by increasing producer surplus, but domestic consumers see a small consumer surplus. When the tariff is imposed, the domestic price of the good rises to P t P t. Now, more of the good is provided domestically; instead of producing S S, it now produces S*. Imports of the good fall, from the quantity D−S D − S to the new quantity D*-S*. With the higher prices, domestic producers experience a gain in producer surplus (shown as area A).