Tarrifs

Pros and Cons of Tariffs

Name

Institution

A Tariff in general is a comprehensive tax on goods and services that are imported. The main aim of a tariff is to create security to the domestic product of a nation from the imported goods which are cheaper and have a huge production capacity. Furthermore tariffs also aid in balancing the prices in a country. This paper describes the roles tariffs play in a country and also pros and cons of tariffs.

There exist many different forms tariffs in which each is has its own specific operation. Some of the most notable tariffs include the revenue tariff, prohibitive tariff and protective tariff.

* The Revenue Tariff

This tariff is meant to create and accumulate huge amount of government finances. For example a country that has little product. For it to keep the domestic income strong the government has to install tariff on the goods which have been imported hence levying the prices. The government thus creates a security cover for the product of certain import goods that are limited.

* Prohibitive tariff

This tariff is normally used to diminish competition between the foreign and domestic producers. Furthermore it is used to cease foreign imports present in its track. It works in a way similar to an embargo placed on a specific given country.

* Protective tariff

This type of tariff tends to inflate the prices that imported products have set thus creating a positive price vacuum for locally based industries. Protective tariff highly taxes foreign imports hence forcing a specific company to increase its prices above the competitors who are locally based.

Tariffs are divided into three types

* The specific tariff

This is a fixed amount of money imposed per unit goods. These tariffs are trade barriers meant to reduce imports into countries and are usually the same on all goods and services of its type. The merit of specific tariff is that it is quite easy to control. Furthermore, it impacts on several low cost goods...