Tariff

When a product enters a country, the importer may have to pay a tariff to the government. This raises the cost of imported goods, making them more expensive compared with goods produced at home.

For example, if a country charges a 10% tariff on imported cars, a car valued at 20,000 would carry a tariff of 2,000. The importer usually passes much of this cost on to buyers through higher prices.

Governments use tariffs to raise revenue, to protect domestic industries from foreign competition, to respond to what they see as unfair trading practices or as a bargaining tool in trade negotiations.

Tariffs have trade-offs. They can help protect jobs in particular industries, but they raise prices for consumers and for businesses that use imported materials. They can also lead to retaliation, with other countries imposing tariffs on the first country's exports, which can harm exporters. Most economists believe that broad tariffs reduce overall economic efficiency, although views differ on their use in specific situations.