Tariff
From Free Talk Live
A tariff is a tax on imported goods.
- This List has been borrowed from Wikipedia's article on Tariffs [1]
- An ad valorem tax is a percentage of the value of the item, say 10 cents on the dollar, while a specific tariff is so-much per weight, say $5 per ton.
- A "revenue tariff" is a set of rates designed primarily to raise money for the government. A tariff on coffee imports, for example (by a country that does not grow coffee) raises a steady flow of revenue.
- A "protective tariff" is intended to artificially inflate prices of imports and "protect" domestic industries from foreign competition. For example, a 50% tax on a machine that importers formerly sold for $100 and now sell for $150. Without a tariff the local manufacturers could only charge $100 for the same machine; now they can charge $149 and make the sale.
- A prohibitive tariff is one so high that no one imports any of that item.
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Good intentions
Tariffs are intended to reduce domestic competition from foreign companies. Tariffs add a cost to foreign products, increasing their price, thus encouraging consumers to buy American, so as to keep money within the United States. Decreased competition is also intended to allow young domestic companies a chance "grow up" without getting stomped by already mature foreign ompanies.
Unforeseen consequences
Tariffs reduce competition, which is the true motivation behind a Free Market. Competition rewards whichever companies have superior services or products, encouraging innovation in the industry. Any tariffs which reduce competition hurts companies in the long run by stifling the advancement of the industry.
Examples
United States steel tariff
In 2002, President George W. Bush created a tariff on steel, ranging from 8%-30%. This tariff was meant to be temporary, ending in 2005. However facing criticism from the World Trade Organization, who stated "the tariffs represented an illegal barrier to free trade"[2], the tariff was cut short in 2003. President Bush said in a statement, "I took action to give the industry a chance to adjust to the surge in foreign imports and to give relief to the workers and communities that depend on steel for their jobs and livelihoods. These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them."[3]
