Meaning:

Tariffs are taxes or duties imposed by a government on imported goods and services. They are used as a tool to control trade between countries, protect domestic industries, and generate revenue for the government. In other words a tariff is a tax levied on import which is used for two different purposes one is for revenue and other for protection. For this purpose many types of Tariffs policy will be followed by the Govt.

Revenue tariffs are meant to provide revenue to the state levied on luxury consumer goods. Protection tariff are meant to maintain and encourage those branches of home industry protected by the duties nowadays government levy import duties with a principal objective of discouraging imports in order to encourage domestic production of protected function.

Purposes of Tariffs:

• Revenue Generation: Tariffs can be a significant source of income for governments, especially in countries with limited income tax revenue.
• Protection of Domestic Industries: By making imported goods more expensive, tariffs protect local businesses and jobs from foreign competition.
• Resolving and Negotiation: Tariffs can be used as a bargaining tool in trade negotiations or as a resolving measure against unfair trade practices by other countries.

       Types of tariff:

• Ad valorem: The most common type of duty is the ad valorem duty as a percentage of the total value of the imported common duty the import duty is a fixed percentage of the value of the commodity. It may be 25% 50% and so on
• Specific duties: They are levied for physical unit of the imported commodity as RS X per TV as cloth per meter as oil per liter as fertilizer per tones Etc.
• Compound duties: These types of duties are the combination of the ad valorem and the specific duties in this case units of an imported commodity are levied a percentage ad valorem duty plus a specific duty on each unit of a commodity.
• Sliding duty: Sometimes governments Levi import duties which vary with the prices of commodities imported such duties are known as sliding scale duties which may be either ad valorem or specific normally sliding scale duties are imported on specific basis.

Effects of Tariffs:

• On Consumers: Tariffs often lead to higher prices for imported goods, which can reduce consumer choice and increase the cost of living.
• On Producers: Domestic producers benefit from reduced foreign competition, potentially leading to increased sales and profits. However, they might also face higher costs for imported raw materials.
• On Government: Tariffs generate revenue for the government but can also lead to trade disputes and resolving tariffs from other countries.
• On the Economy: The overall impact on the economy can be mixed. While some industries benefit, others, those depend on imported goods, may suffer. Tariffs can also lead to inefficiencies and a misallocation of resources.

Conclusion:

Proponents argue that tariffs protect nascent industries, save jobs, safeguard national security, and prevent dumping (selling goods below cost to eliminate competition). Critics argue that tariffs lead to higher prices for consumers, inefficiencies, and retaliation from other countries, potentially leading to trade wars and reduced international trade.

also read: explain the concepts of terms of trade.