Effects of tariffs

Tariffs increases prices and raises money for the government.

Tariffs will encourage the launching of new businesses and create jobs.

Reduced spending on imports can be diverted to domestic spending and increase domestic
employment.

Tariffs will lower prices and increase the exporting of U.S. goods.

Tariff barriers create obstacles to trade, decrease the volume of imports and exports.
By making imported goods more expensive, tariffs discourage domestic consumers from consuming imported
foreign goods.

Tariffs encourage consumption and production of the domestically produced import substitutes* and thus
protect domestic industries.

Producers in the domestic country experience an increase in well-being as a result of the imposition of the
tariff as now they can charge higher prices than would be possible in the case of free trade because foreign
competition has reduced.

The price increase also increases the output of the existing firms and possibly the addition of new firms to take
advantage of the new high profits and consequently an increase in employment in the industry.

Tariffs create trade imbalance by disregarding comparative advantage. Thus, tariffs discourage efficient
production in the rest of the world and encourage inefficient production in the home country.

Tariffs increase government revenues of the importing country.

Non tariffs

negative
The government cannot generate extra income. Under the tariff, the government imposes a tax on
imported goods. On the other hand, it does not apply to non-tariff barriers.

Non-tariff barriers limit the functioning of the free market. Free market advocates view this as causing
the inefficient allocation of resources in global markets.

The cost of running a business increases. The company has to fulfill several administrative
requirements, such as product standardization and complicated customs procedures.
The market faces scarcity. When the government limits quotas, the market supply decreases. If
domestic companies cannot compensate by increasing production, then market prices will rise to
consumers’ detriment.

Competitiveness weakens in the long term. Competition is essential for promoting innovation,
efficiency, and productivity. Indeed, initially, government protection protected industry and domestic
jobs.

Positive

The domestic market creates more jobs. The decline in imports should divert demand for domestic
products.

Non-tariff barriers protect new or strategic industrial developments. That provides sufficient room for
them to grow, achieve economies of scale, and be competitive in the international market. Finally, they
create more jobs and income for the domestic economy.

Non-tariff policies are more effective in limiting import volumes. Under quotas, for example, the main
target is the quantity of imports. When the government tries to reduce imports, quotas are more
effective than tariffs because they directly impact import volumes.