Chase on the Case

  International trade is not a zero-sum game What are tariffs and what are they for? Tariffs are a form of entry fee to a country’s domestic market. They are imposed by that country’s government on goods that are exported to it from other countries. They are usually calculated as a percentage of the price of the product – so, for example, Trump has imposed a 25% tariff on all imports of motor cars. When the tariff concerned is a high percentage it is usually passed on to the consumer. There are three possible reasons for imposing tariffs: 1.       To protect a domestic industry that is in its infancy from foreign firms that have already achieved significant market penetration and have the benefit of economies of scale. A lot of developing countries impose tariffs for this reason, and it is, in my opinion, the only justifiable reason for imposing them, apart from preventing ‘dumping’ – countries exporting surplus production at below cost price. 2. ...