Tariffs: Paying for Domestic & Imported Goods & Services - Research Paper

Introduction

A tariff is the amount of money that is paid when a country imports goods and services from another country to the domestic market. This is a kind of a trade that is used in paying of products that are shipped from another state. These tariffs are used to encourage the domestic market as some of the goods imported from another country are very high. They are also used to discourage the import of products and services. For example, coffee that is imported from another country is costly as tariffs raise the prices of the coffee imported to the country. Tariffs are of two types: A specific tariff and ad-valorem tariff. Each commodity introduced has a different tariff; no two same goods have the same tariff.

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The government always fix these tariffs on the goods being imported. This is usually done to protect the domestic markets from the competition as they discourage people from buying things outside the country since they are costly. When items are valuable, the people see no sense of buying them and opting to buy things from the domestic industries. These tariffs help promote the local market as many people can purchase goods and services at a fair price rather than buying expensive products and services from another country. When the local market is promoted, people can secure jobs in the industries, and many sectors are opened up to manufacture different goods. Services are also offered in the country at fair costs. The tariffs are also used to show political essence in a country.

The tariffs also have adverse outcomes for the economy of a country. First, they can make many industries open up, some producing the same goods. This might reduce the competition as a specific industry might want a better product than the other sector, making the other worthless. And when there is no competition, the companies might decide to raise the prices of the goods. The consumer might lack interest in buying the products. Second, the tariffs might make people favour the goods that are produced by a particular industry for a specific area over rights in another geographical area. This is because most enterprises are situated in urban areas and very few found sectors in rural areas. This also makes the people in rural areas lack access to all goods and might pay dearly to get those goods. The tariffs also damage the relations with other countries as they discourage the countries to trade between themselves. The tariffs make economic growth slow. This is because the prices of goods will be high, making the buy not able to purchase them. This then will make them lose value in the market.

Worldwide tariffs make the economy of the country rise. This is because there will be a reduction in competition in the domestic market. This will make the industries raise the prices of the commodities meaning that the consumer has to raise his standards of living. All these will benefit the country as all this is done within the country, and no foreign nation is involved.

The trade war is a point where the countries strive to be superior to the other in business. This is usually done by raising the tariffs in the goods being imported to other countries. Additional trade restrictions are also introduced within the states. A trade war occurs when the government wants to protect the local industries from competition and also wish to discourage international buying of goods. A trade war that starts between a country with another country might affect the trade between the state and another country. For example, if there is a trade war between Kenya and Uganda, the war will affect the trade between Kenya and Tanzania. So, the trade war affects the business relationship between the countries negatively, causing danger to the world economy. An example of a trade war is that between the USA and China. President Trump put pressure, especially in China, as it had been accused of IP theft and had put a tariff of $500 on Chinese goods. The USA had demanded a significant fine on the theft of China. China responded by taxing 25% on more than a hundred goods that the US imported from China. Trade wars usually occur between countries that had a great business and political influence in other countries. An example is the trade war between the USA and China. They both have global power in the worldwide market and can hit back with higher taxes when boomed with tariffs.

Powerful countries with important markets use tariffs to hit on the third world countries that have tariffs. This is because these small counties are not able to retaliate back, thus giving them the option of either continuing being in business or backing out from the business. And this also happens when the big countries know that they are the only source of certain goods and that the domestic market doesn't produce the products. This makes them take advantage of that fact. The small countries usually set low tariffs as they don't have the resources to fight back with. This makes the big countries win them over to them so quickly.

Conclusion

In conclusion, tariffs are a danger to the economy of the country. This is because tariffs are the charges put on the goods imported in a country. They are usually put up to discourage the importation of products and promote the local industry. The tariffs have both positive outcomes like reducing foreign competition to the local industry and adverse consequences like the rising of prices of goods and services in the country.