A tariff is a tax or duty enforced by a government on imported or, less usually, exported products.
Types include ad valorem, specific and compound tariff.
A tariff is a tax or duty enforced by a government on imported or, less usually, exported products. It is applied to control trade, safeguard home businesses, and provide government income.
Protect Domestic Industries: Tariffs drive people to purchase locally made items by increasing the cost of imported goods.
Create Income: The government might find money from tariffs.
Balance Trade Deficits: Discouragement of too high imports helps a nation balance trade deficits.
Retaliation: Sometimes enforced as a countermeasure against unfair commercial practices by other nations.
1. Ad Valorem Tariff:
2. Specific Tariff:
3. Compound tariff:
Prices Rise: imported products start to cost more for consumers.
Reduces Competition: Foreign businesses could provide less of a challenge for home producers.
Trade Wars: Too high tariffs may set off foreign nations' retaliatory actions.
Revenue Generation: Taxes let governments generate large amounts of money.
If India imposes a 20% tariff on imported furniture worth ₹2,00,000, the tariff amount would be:
Tariff = ₹ 2,00,000 × 0.20 = ₹ 40,000.
The importer would pay ₹2,00,000 plus ₹40,000 for total cost. ₹2,40,000.