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Reasons for Imposing Tariffs on Imports

Question

Analyse the reasons why a country may impose tariffs on imports.

Category:

International Trade and Exchange Rates

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Preview Answer

I. 🍃Introduction
- 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

III. 👉Conclusion
- Summary of reasons for imposing tariffs
- Importance of balancing protectionism and free trade
- Future outlook on the use of tariffs in international trade.

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