Tariff

Building on our understanding of international trade, this episode focuses on one of the most common barriers that stands in its way: the tariff. We will define what a tariff is, distinguish between its main types, and explore the various reasons governments choose to implement them, from protecting fledgling domestic industries to raising revenue. You will learn about the economic consequences of tariffs, understanding who benefits, who loses, and why economists generally argue that they result in a net loss for society. This episode provides a crucial foundation for understanding the global debate between free trade and protectionism.

Check your understanding

These are the same multiple-choice questions you will see in the Quiz section after you listen to the episode. Use them here to preview or review the answers.

What is the primary definition of a tariff?

  1. A subsidy given to domestic exporters.
  2. A limit on the quantity of goods that can be imported.
  3. A tax imposed by a government on imported goods.
  4. A ban on trade with a specific country.
  5. A quality standard that imported goods must meet.

A tariff of 15% on the value of all imported shoes is an example of what type of tariff?

  1. A specific tariff
  2. A quota tariff
  3. An ad valorem tariff
  4. A revenue tariff
  5. A retaliatory tariff

What are the common justifications governments give for imposing tariffs?

  1. To increase the variety of goods available to consumers.
  2. To protect new or struggling domestic industries from foreign competition.
  3. To generate revenue for the government.
  4. To ensure the country is not dependent on foreign suppliers for goods vital to national security.
  5. To lower the prices of domestic goods.

In the country that imposes a tariff, which group is generally made worse off as a direct result?

  1. The government
  2. Domestic producers in the protected industry
  3. Domestic consumers
  4. Workers in the protected industry

According to standard economic theory, what is the typical overall effect of a tariff on the country that imposes it?

  1. A net economic gain, as the benefits to producers outweigh the costs to consumers.
  2. No significant change in overall economic welfare.
  3. A net economic loss, as the costs to consumers from higher prices outweigh the benefits to producers and the government.
  4. A guaranteed increase in the country's balance of trade.

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