The Uses Of Protective Tariff

There are different kinds of taxes that are framed by governments in order to influence trade of a country in certain directions. Protective tariff is a tax that is usually imposed on goods that a government wishes to discourage the residents from spending on. The tariffs of this nature usually inflate the import prices of different goods. This kind of tariff is imposed in order to promote domestic goods in the same category. Many trade activists state that this kind of traffic is a threat to free trade. Others claim that there are certain benefits of this kind of tariff. Domestic money is retained in the domestic economy with such a tariff.

Instances of protective tariff

Many countries have a protective tariff on certain agricultural produce such as oranges. South America is known to produce citrus fruits in large quantities. These are exported to all parts of the world. If the oranges are cheaper when they are imported from this country than growing them domestically, the domestic production will suffer. For that reason, protective tariff might be imposed. This makes the prices higher or comparable of the imported oranges as compared to domestically produced oranges. The same works for UK car importers in Australia.

Arguments against tariffs

Some free trade enthusiasts argue that the imposition of such taxes is a barrier to free trade. The only addition that is logical to the price of imports should be the shipping costs. The material costs need to be added as well as the manufacturer’s profits besides which no tax should be imposed on UK car importers. This link will help you reagrding car importers.

Arguments in favor of tariffs

Local businesses find that protective tariffs help protect their business interests. The idea behind import tariffs is that, local businesses need to be protected so that money of the economy stays in the economy. When a business prospers locally, they will feed money back into the system. The local businesses will prosper and expand, increasing employment opportunities and economic benefits are reaped. When imported goods are purchased, money is sent back to another country. It supports growth or business in another economy. Import based economies can become hollow as the money does not come back to the community.

Preventing unfair competition

There is logic behind protective tariffs being imposed by governments. When a good is imported and made available at cheaper rates, this can make the domestic production less profitable. As a result, local producers will go out of business. In order to keep up the businesses and to make them competitive, levying of a protective tariff is seen to be beneficial. The imposition of tariff is a requirement that differs from one country to another as well as variations between different goods category.