Tariff definition and explanation

Increasing unilateralism, Protectionism has thrown the world into a full-blown trade war. US-China, US-India, US-Europe, etc all are imposing the tariff on each other products.

definition

Tariffs:-Tariff is nothing but a tax imposed by one country on the goods and services imported from another country. 

Application

Tariffs are used mainly to restrict imports in order to

Promote the domestic industry: -Increased competition from imported goods can threaten domestic industries.

Earn revenue:- Government may impose a tariff to earn revenue.

Consumer protection:-Government may impose high tariffs in order to protect the local population from the side effects of imported products.

Geopolitical strategic reasons/Retaliation:-Government may impose tariffs for geopolitical strategic reasons. for example, India has raised tariffs on 28 items, including almond, pulses, and walnut, exported from the US in retaliation to America’s withdrawal of preferential access for Indian products.

National security:-Country may impose tariffs on products vital for national security.




Tariffs increase the price of goods and services purchased from another country, making them less attractive to domestic consumers. 



Tariff Explained

kinds of tariff


Specific tariffs:-Based on the unit, it is fixed. for eg.$15 tariffs on each pair of shoes imported,$300 tariff on each computer imported.

ALSO READWorld Bank’s Ease of Doing Business!!


Ad valorem tariffs:-Based on the value of the product. For eg.50% tariff levied by India on U.S. motorcycle Harley Davidson.


The 50% is a price increase on the value of the motorcycle, so a $20,000 motorcycle now costs $30,000 to Indian consumers.

So, This price increase protects domestic producers from being undermined and also keeps prices artificially high for Indian motorcycle buyers.

One thought on “Tariff definition and explanation

Leave a Reply

Your email address will not be published. Required fields are marked *