Tariff

A tariff is a customs duty levied on goods entering a country, making imports more expensive and less competitive relative to domestically produced alternatives. Tariffs serve multiple purposes: protecting nascent or struggling domestic industries (protectionism), generating government revenue, retaliating against unfair trade practices (dumping, subsidies), and serving as leverage in trade negotiations. Types include ad valorem tariffs (a percentage of the import's value), specific tariffs (a fixed amount per unit), and compound tariffs (combining both). While tariffs protect domestic producers and their workers, they raise prices for consumers and businesses that rely on imported inputs, can trigger retaliatory tariffs from trading partners (trade wars), and reduce overall economic efficiency. The U.S.-China trade war beginning in 2018 saw tariffs imposed on hundreds of billions of dollars of goods, disrupting global supply chains and increasing costs. Economic theory generally holds that free trade maximizes overall welfare, though the gains and losses are unevenly distributed. Tariff announcements can significantly impact stock markets, commodity prices, and currency exchange rates.