How Do Tariffs Work?

Save

What are Tariffs?

  • Tariffs are a kind of specialized tax that affect goods imported to, or exported from, a country. Tariffs are mandated by national governments and are a particularly easy form of tax to collect. Tariffs are used by governments for many different reasons, some good and some with insidious intent. Tariffs are also extremely important to international trade and can seriously affect the flow of goods around the globe.

What Types of Tariffs Exist?

  • There are two major types of tariffs: those based on a percentage of the value of products and those with a set price. Tariffs based on a percentage of the value of goods are called "ad valorem tariffs," and those with a preset value are called "specific tariffs."

Why Do Countries Impose Tariffs on Goods?

  • Tariffs can be a good way of raising governmental funds. If a business wishes to import or export goods, they'll have to pay the tariffs or else risk legal problems with that government. Likewise, governments can use tariffs to help their domestic businesses compete with foreign competitors by making foreign goods more expensive to purchase. Governments also use what are called "prohibitive tariffs," which are meant to be so costly that they stop a product from being imported or exported altogether.

  • Photo Credit Public Domain, Wikimedia Commons
Promoted By Zergnet

Comments

Resources

You May Also Like

  • What Are Non-Tariff Barriers?

    Historically, nations sought to protect domestic industries from foreign competition by levying tariffs on goods imported from other nations. Since the 1970s,...

  • Why Do Firms Invest Overseas?

    During the last few decades the world has experienced a growth in multinational corporations and international investments have increased exponentially. The emergence...

  • How to Calculate US Import Duties

    Import duties are charged on all items that enter the country to be sold in the U.S. market. Although import duty laws...

  • How to Calculate Import Duties From China to the U.S.

    The United States charges customs duties on products transported across international borders. Different products have different duty rates, as determined by the...

  • How to Pay China Import Tariff Fees

    China has enjoyed one of the world's fastest-growing economies since 1978, when it adopted market reform. China is the third-largest trading partner...

  • Negative Effects of Tariffs

    Tariffs, defined by Merriam-Webster as charges imposed by governments on imported or exported goods, have been used since ancient times to protect...

  • The Benefits of Tariffs & Quotas

    Most economists agree that free trade is the best way to maximize a country’s growth potential, but elected officials may have other...

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!