Title: Economics 101: What Is a Tariff? Learn How Tariffs Work in Economics With Examples - 2021 - MasterClass
Headings: Economics 101: What Is a Tariff? Learn How Tariffs Work in Economics With Examples
Economics 101: What Is a Tariff? Learn How Tariffs Work in Economics With Examples
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What Is a Tariff?
2 Types of Tariffs
What Is the Purpose of Tariffs?
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When and How Did Tariffs Originate?
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How Are Tariffs Decided?
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Content: Today, tariffs are also the most basic tool countries use in a trade war. If the countries involved are large enough, they may use tariffs as a way to exert significant pressure on one another in order to exact concessions on trade or other areas. The idea is that by making foreign products more expensive, governments can encourage their citizens to buy from domestic producers instead (producers that might not be able to compete otherwise). In theory, it’s a way for governments to boost the domestic economy while reducing their trade deficit. In practice, it’s much more complicated. Increasing prices (remember, a tariff is a tax) can lead to a reduction in GDP in the short term, as goods and services become more expensive for consumers. In the long run, protected industries may also become less efficient or innovative due to a loss of competition. Retaliatory tariffs can also cause major damage to industries that rely on exports or industries that have complex supply chains dependent on international trade. Believers in more liberalized or free trade are generally opposed to tariffs, on the belief that lower barriers to trade benefit all parties: by keeping prices low and allowing international commerce to flow unimpeded.