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Reasons for Imposing Tariffs on Imports
Analyse the reasons why a country may impose tariffs on imports.
International Trade and Exchange Rates
Frequently asked question
Revise and edit your essay if time permits.
Countries may impose tariffs on imports for several reasons. Here are some possible reasons:
Firstly, tariffs can increase the price of imports, reducing demand for imports and import expenditure. This can improve the current account position or balance of payments, which is the difference between a country's exports and imports. By reducing imports, a country can reduce its trade deficit and improve its economic growth.
Secondly, tariffs can protect infant industries by enabling them to take advantage of economies of scale and preventing foreign firms from driving them out with lower costs due to their size. This can help the development of domestic industries and promote self-sufficiency.
Thirdly, tariffs can protect declining industries to prevent unemployment from rising. This can help to protect jobs and reduce the social costs of unemployment.
Fourthly, tariffs can protect strategic industries to ensure self-sufficiency and national security. This can help to avoid dependence on imports of critical goods that may be subject to disruption in times of crisis.
Fifthly, tariffs can discourage the consumption of demerit goods, such as tobacco or alcohol, that have negative impacts on health and welfare. This can help to promote public health and reduce the costs associated with the treatment of illnesses caused by the consumption of these goods.
Sixthly, tariffs can be used to prevent dumping of overseas goods, where goods are sold at below cost price or aimed at driving out domestic firms. This can help to prevent unfair competition and promote fair trade.
Seventhly, tariffs can be used as a source of government revenue. By imposing tariffs, a country can generate revenue that can be used to subsidize domestic producers or fund other government programs.
Lastly, tariffs can be used as a countermeasure or retaliation in response to unilateral imposition of tariffs by another country. This can help to protect domestic industries and promote fair trade practices.
In conclusion, countries may impose tariffs on imports for several reasons, including protecting domestic industries, promoting self-sufficiency, and improving the current account position. However, tariffs may also have negative effects, such as reducing international trade, increasing prices, and promoting inefficiency. Therefore, it is essential to consider the potential costs and benefits of tariffs carefully.
- Definition of tariffs
- Importance of tariffs in international trade
II. Reasons for imposing tariffs
A. To increase the price of imports
- Reducing demand for imports
- Reducing import expenditure
- Improving the current account position/balance of payments
- Increasing demand for domestic firms
- Reducing unemployment
- Increasing economic growth
B. To protect infant industries
- Enabling them to take advantage of economies of scale
- Preventing them from being driven out by foreign firms with much lower costs due to size
C. To protect declining industries
- Preventing unemployment from rising
D. To protect strategic industries
- Ensuring self-sufficiency
E. To discourage demerit goods
- Improving health/welfare of consumers
F. To stop dumping of overseas goods
- Where goods sold at below cost price
- Aimed at driving out domestic firms
G. As a source of government revenue
- Using revenue to subsidize domestic producers
H. As a countermeasure/retaliation
- In response to unilateral imposition of tariffs by another country
- Summary of reasons for imposing tariffs
- Importance of balancing protectionism and free trade
- Future outlook on the use of tariffs in international trade.
Coherent analysis which might include: To increase the price of imports - may reduce demand for imports - reduce import expenditure - improve the current account position / balance of payments - increase demand for domestic firms - reduce unemployment - increase economic growth -. To protect infant industries - enabling them to take advantage of economies of scale / stop them from being driven out by foreign firms with much lower costs due to size -. To protect declining industries - prevent unemployment rising -. To protect strategic industries - ensure self-sufficiency -. To discourage demerit goods - to improve health / welfare of consumers -. To stop dumping of overseas goods - where goods sold at below cost price / aimed at driving out domestic firms -. As a source of government revenue - e.g. to use to subsidise domestic producers -. As a countermeasure / retaliation - in response to unilateral imposition of tariffs by another country -