(a) Define tariffs (b) What are the reasons for imposing tariffs?
Question 1 Report
(a) Define tariffs
(b) What are the reasons for imposing tariffs?
Answer Details
a. Definition of tariffs. Tariffs are taxes or duties imposed by a government on goods that cross its national boundary, chiefly on imports (and sometimes on exports). They raise the price of the affected goods.
b. Reasons for imposing tariffs.
- To raise government revenue: import and export duties are an important source of income.
- To protect infant industries: tariffs make imports dearer, giving young home industries room to grow.
- To prevent dumping: they discourage foreign firms from selling goods below cost in the home market.
- To correct a balance-of-payments deficit: tariffs reduce imports and so save foreign exchange.
- To protect employment: by discouraging imports, they safeguard jobs in local industries.
- For retaliation: a country may impose tariffs in response to tariffs placed on its own goods.
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