The tax which is levied on an imported good is known as a tariff paid to the customs authority of the importing country that somehow adds to the cost borne by the customers it is also to be considered cost bearing doesn’t happen overnight.
Still, these are levied mainly to promote inland production, imposed by governments at times to make imported goods less attractive.
A specific tariff is inflicted as fixed duty based on the type of the item. An Ad-valor-em tax is levied on the value of the article, in percentage form. These are also used as an extension of the foreign policy adopted by various nations to exert economic leverage.
The tax is not imposed directly on the foreign country but is paid by domestic consumers to make international products more expensive. Often goods from abroad are cheaper, followed by lesser capital or labor cost. If that becomes expensive, the valuable consumer will automatically choose domestic products.
Tariffs are also created to protect infant companies and underdeveloped economies. Still, these measures are also adopted by large industries in developed economies, majorly to protect domestic employment, consumers if anything not very well suited for human consumption is being imported, and to safeguard overall National security, Countries also import the tariffs if they have an impression that other economies are ‘not playing by the rules’. Thus, there are several reasons why any country imposes tariffs.
There are various of its kind two of them discussed earlier too, more among the types are in the form of Licenses, import quotas, voluntary export restraints, and more.
The benefits of the tariffs are uneven; domestic countries benefit from the decreased competition, the government might see increased revenue from taxes, it promotes inland production, and so on.
Imposing tariffs at times lead to a trade war with actions of putting restrictions or heavy-duty on imports from one country to another. Trade wars can be regarded as side effects of protectionist policies.
As far as agriculture trade in concerned, the difference in tariffs in countries makes it possible for farmers in one country to take advantage of it. In contrast, farmers in other countries lose income because of lower prices from those tariffs, as it affects both importing and exporting countries.
Tariffs result in price rise within the country imposing them. Thus, higher prices affect Supply as farmers increase the output; it affects the demand as consumers buy less.
Its effects on the domestic market can also affect world markets as more supply and less demand reduce imports. If a country imposes tariffs on large trading countries, global prices can also fall, as seen in the trade war between the USA & China.
The case against tariffs has two factors, the imbalance within a country by higher domestic prices, the excessive costs imposed on other countries by lost export sales and lower prices.