Why Are Tariffs Used?

Importing and exporting takes place in nearly every country across the world. Everything from petroleum products to agriculture can be an import or an export, depending on the resources a country has and the resources it requires. The free trade of goods can be beneficial to consumers, but it can also hurt a nation’s economy.

If a country can undercut wages and prices by exporting cheap goods to a country with higher wages and prices, the country receiving those goods may not be able to compete. The result can be that employers in the country receiving the cheaper goods will go out of business, less tax money is collected and the exporting country grows richer.

Tariffs as a Solution

One way to try to balance this equation is to impose tariffs on imported goods. A tariff is a tax that is paid by the importer of foreign goods. In the United States, this tax is collected by the U.S. Customs and Border Patrol, but in other countries, it will be collected by an equivalent agency.

Export-import (exim) data is used to gauge how a tariff will affect trade. Exim data can also demonstrate the effectiveness of tariffs over time. Consumers generally end up paying more for imported goods that are subject to a tariff. The goal of this approach is to encourage companies to do business domestically instead of importing.

If a company can purchase goods from a domestic producer cheaper than they can from a foreign producer because a tariff pushes the price higher, the expectation is that both consumers and domestic companies will want to do business with domestic producers. This usually plays out when examining exim data.

Escalating a Trade War

Tariffs do have a chance to create a trade war in some cases. This can happen when one country imposes tariffs on certain goods from another country. To retaliate, the country receiving the tariff may introduce equal or more harsh tariffs on the first country. This can go on as both countries attempt to outdo one another, potentially resulting in higher prices for everyone in both countries.

Read a similar article about global import export data here at this page.