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Reasons for imposing import tariffs?


Analyse the reasons for imposing tariffs on imports.


International Trade and Exchange Rates

O level May/June 2023

Preview Answer

- Introduction:
- Definition of tariffs as taxes on imported goods and services.
- Overview of the essay's aim to explore the economic rationale behind tariffs.

- Improving the Current Account Balance:
- Tariffs increase import prices, reducing demand and boosting net exports.
- Stimulate economic growth and domestic production, potentially reducing unemployment.

- Protection of Domestic and Strategic Industries:
- Shield emerging industries and strategic sectors related to national security.
- Encourage domestic consumption, fostering economic growth and employment.

- Revenue Generation:
- Tariffs provide revenue for governments, especially in developing economies.
- Funds can be allocated to socio-economic objectives like education or deficit reduction.

- Discouraging Imports of Harmful Products:
- Increase prices of harmful goods like tobacco to dissuade consumption.

- Preventing Unfair Competition:
- Deter unfair trade practices such as dumping or products made with unfair labor practices.

- Retaliation:
- Imposing tariffs in response to tariffs imposed by other countries.

- Prevention of Exchange Rate Depreciation:
- Manage import demand to prevent depreciation of the exchange rate and maintain economic stability.

- Conclusion:
- Tariffs serve various purposes but require careful consideration by policymakers.
- Importance of mitigating potential repercussions and achieving desired economic outcomes.

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