a tariff is essentially a tax on goods and services that are imported the purpose of a tariff is generally to protect the product or a service that is domestically produced here the basics of how a tariff might work let’s imagine that country a produces widgets and country B produces similar widgets country B is able to produce their widgets for ten dollars each while in country a it cost them fourteen dollars to produce their widgets well in an effort to get more business the manufacturers in country B decide to
sell their widgets in country a for just thirteen dollars a widget as you can imagine this isn’t good for the manufacturers in country a now they can’t sell their widgets for a profit well business begins to slow for the manufacturers in country a and because business is slowing they must let go of some of their workers well the government in country a doesn’t like this so they decide to impose a tariff on all widgets that are imported into country a from country B they are going to charge five dollars per widget to all
imports well now the manufacturers in country a are thrilled they can sell their widgets for let’s say fifteen dollars a widget and the competitors in country B can’t beat their price so that is essentially how a tariff works now the real question is is this good or bad well for the widget manufacturing country a it’s a great thing they were losing money before with no real way to compete but now they’re selling the widgets again for a profit and they can hire again in their businesses growing so what about potential negatives well
one potential negative is retaliation by country be perhaps country B is upset by this widget tariffs and perhaps they put their own tariffs on let’s say chickens that are imported into their country from country a and also let’s imagine that there’s a lot of chickens that gets shipped from country aid to country B well this could be the beginning of a trade war a no vote and often takes a long time for trade Wars to play out there tends to be many losers and only a few winners in a trade war another
consideration is the end user you might hear an argument saying something like that country a manufacturers were taken off the hook instead of country a manufacturers having to innovate or cutting costs to compete with the manufacturer in the country B instead the government stepped in so what about the end user the people or companies that bought those widgets before used to pay just $13 per widget thanks to the imported widgets but now it’s costing them $15 a widget which makes their expenses higher so our
tariffs good or bad well you decide since it seems that the answer to that question depends on who you ask.
