This is a type of tax which is imposed by a government on imported goods from other countries.
The tariff must be paid by the foreign firm in order for their good to clear customs and enter the country’s market.
A tariff is a type of protectionist trade policy because it increases the cost for foreign firms to sell in a country. The firm is likely to reduce their sales in this market or pass on the cost to the consumer as a higher price.
Icons made by Freepik from www.flaticon.com
Key terms:
Protectionism – the process of protecting domestic industries by introducing restrictive measures on imports.
Import – goods and services which are bought from other countries and sold in the domestic market.
Export – goods and services which are produced in the domestic market and sold in other countries.