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Trade Barriers
Trade barriers are any type of policy implemented by a government to constrain and control international trade. Trade barriers will affect imports and exports, making them more difficult or expensive according to the situation. Trade barriers are used for a variety of reasons. They can be implemented to increase and protect domestic goods over imported ones, manage the flow of goods in and out of a country, and for political reasons. Tariffs are a type of trade barriers. They are the taxes imposed on importers. When tariffs are implemented, they raise the taxes on imported goods, making them more expensive in price and lower sales. This process leads to an increase in the purchase of domestic products.
Other types of trade barriers include: quotes, subsidies, import licenses, standards and regulations, and many more.
Tariffs; The Process
As mentioned above, tariffs raise the price of foreign goods for domestic consumers. When tariffs are imposed, the imposed taxes are not paid by the importer but by the domestic customers. Those taxes are added to the price of the goods, which leads to an increase in the overall prices. This process can encourage the customers to buy similar domestic goods instead and can make the market less competitive for the domestic companies. For example, a country imports different types of cars from its neighboring country. Since this country also produces cars and wants to increase the sales of its domestic cars, it imposes tariffs on the imported cars. As a result, the importers raise the price of their cars to pay the new taxes, leading to an increase in the price of their cars and potentially an increase in the sales of the domestic produced cars.
Advantages and Disadvantages of Tariffs
Like anything else, tariffs have both benefits and setbacks.
Tariffs strengthen the domestic goods’ sales and make the market less competitive for them, resulting in more productivity of the domestic market.
The rise in the domestic market can lead to more job opportunities for locals.
Tariffs also generate revenue for the government via the taxes.
They also reduce the trade deficit which is the gap between the imports and exports of a country. Heavily relying on imports is not healthy for a country, thus reducing the gap between imports and exports can have positive impacts on the economy.
Tariffs prevent dumping, meaning not allowing importers to sell their products at extremely low prices to win the market.
The same way that it has many positive points, there are negative ones.
Tariffs make the price for goods higher and if there is not an acceptable domestic replacement for those goods, consumers need to pay for much higher prices.
Tariffs can hurt the market by reducing the competition. By not having any competition, local industries may not try for efficiency and innovation.
Tariffs can hurt exports. By imposing tariffs, the affected countries may retaliate and implement their own tariffs, hurting the exports and if escalated, the global economy. An example of the retaliatory tariffs are the recent tariffs imposed by Canada on the U.S in March, 2025. A response for the prior tariffs imposed by the U.S on Canada earlier this year.
Tariffs can slow down the economic growth through the reduction of imports and exports they cause.