A new topic for discussion, tariffs, has been in all news and debates also on social media and in print media.
What is this Tariff and how does it work?
Let us understand this.
Tariffs have historically been implemented by nations as a way to protect their home products from being underpriced by foreign competition. In modern times, they have largely been abolished as nations sign mutual trade agreements to take advantage of opportunities for their products abroad.
Tariffs still exist, though, most often in less developed countries that are struggling to grow their domestic industries or are seeking a steady source of revenue. The downside is high prices for domestic goods and even higher prices for imports once the tariffs are factored into the price.
Tariffs are usually the taxes one pays to the government while importing a product. Tariffs increase the product price as the buyer will add all the expenses and profit to the price before selling. This is called the import duty or customs duty. This is a way the government earns.
While the President of the USA has announced tariff hikes on Canada, Mexico, China, and many other countries, the tariff talk has been viral.
Who are affected – well directly or indirectly all of us are affected. When the imported product is sold in the retail market, obviously the consumers also pay a share of the import duty.
According to the World Bank data of 2020, the below listed are the countries with the highest of import duty:
The USA & the EU countries have 1.5% Tariff.
India has about 5.9% and China has about 2.3% tariff on imports.
Not all products invite customs duty or tariffs.
Tariffs are NOT the only variety of trade barriers: others include tariffs the only variety of trade barriers: others include exchange controls, subsidies, fair trade laws, local-content requirements, and quotas on imports and exports., fair trade laws, local-content requirements, and tariffs the only variety of trade barriers: others include exchange controls, subsidies, fair trade laws, local-content requirements, and quotas on imports and exports.
Many countries do not have tariffs. Tariffs are not a blanket number on goods but rather tariffs are applied to specific products or industries. The World Bank reports tariffs on a weighted mean, and the countries that have no tariffs include Hong Kong (China), Macau (China), Sudan, and Brunei Darussalam.
The End Note:
Many nations have abolished tariffs and signed free trade agreements to pursue foreign markets for their goods.
There are exceptions, however. The United States has protective tariffs in place for Many nations have abolished tariffs and signed free trade agreements to pursue foreign markets for their goods.
There are exceptions, however. The United States has protective tariffs in place for certain industries including paper clips, tuna fish, tobacco, and peanuts.
Other countries, most of them smaller and less developed, continue to impose tariffs as a way to encourage local production and raise government revenue. including paper clips, tuna fish, tobacco, and peanuts.
Tariffs are based on an individual country’s foreign trade policy, internal revenues, and economy. What is best for one may not be right for others.