Effects of Tariffs on Industries and the Economy

Running head: INTERNATIONAL TRADE AND ENTERPRISE 1
INTERNATIONAL TRADE AND ENTERPRISE
NAME
INSTITUTION

INTERNATIONAL TRADE AND ENTERPRISE 2
Executive summary
This report will discuss three sections. The fist will explain the effects of tariffs on
industries. Tariffs and import duty has several effects on industries. The impacts may be
positive or negative. tariffs protect infant industries from the stiff competition from
developed industries. This may be done by increasing the import duty hence making it
difficult for the domestic market to import goods into the country. The limit on
importation makes the local population to depend on the locally produced goods. The
second section will talk about the effects of tariffs on the economy. Tariffs also impact
on the economy in several ways. The import duty will affect the market and the market
effect will, in turn, affect the trade price and traded volume. Import duty increases the
price of the item that is taxed, it has a protective effect on the domestic suppliers when it
is imposed with the aim of shielding local suppliers from foreign competition. In extreme
cases, the import duty is not limited to its initial impact but spreads its effect to different
sectors and activities of the economy. The third section will talk discus the general
benefits of tariffs. Some of the benefits that will be discussed in the report include
reducing the consumption of certain goods. Tariffs may reduce the consumption of
certain goods by increasing its price hence making it expensive for consumers to afford.
In addition, tariffs lead to expansion of the economy, revenue to the government,
protecting local industries, creation of employment, and preventing dumping.

INTERNATIONAL TRADE AND ENTERPRISE 3
International trade and enterprise
Introduction
Trade refers to the exchange of goods and services between companies,
countries, people, and other business entities. There two types of trade which include
international and domestic trade. Domestic trade is carried out within the country
whereas international trade takes place between two or more countries. International
trade has several benefits. The advantage of international trade is creating a variety of
goods and services. International trade leads to better utilization and allocation of
resources. More so, it enhances efficiency in production. This is where countries try to
adopt better production methods to lower cost and stay competitive in the market.
Moreover, international trade has led to more employment opportunities due to the
growth of the nations’ trade. This has led to the development of local industries hence
generating employment to the locals. The interaction trade is the reason behind the
introduction of tariffs and import duties in the country. On the other hand, a trade tariff
refers to a tax or duty imposed by the state of a nation upon the traded commodity as it
crosses the country’s borders. Trade tariff works the same as import duty. A trade tariff
can also be referred to as a duty. Both are tax collected on imports or exports by a
nation’s customs authorities. The tariffs can be imposed on imports and exports. The
tariffs imposed on goods leaving the country to foreign destinations are referred to as
export duties whereas those imposed on goods entering the country are called import
duties. These duties are imposed on goods as a way of regulating trade. There are
several types of tariffs. The tariffs that are classified on the basis of a criterion for
importation include specific tariff, Ad valorem tariff, compound tariff, and sliding scale
tariff. The tariffs that are classified on the basis of purpose for which tariffs are imposed
include revenue tariff and the protective tariff. The third classification is on the basis of
discrimination. According to this basis, there are two types of tariffs: non-discriminatory
and discriminatory tariff. On the basis of products, the tariffs include import and export.
Additionally, they are classified according to the basis of retaliation which includes
countervailing and retaliatory tariffs.
Effect of tariffs on industries
Most countries have adopted the idea of tariffs because of their advantages to
their local industries. Tariffs protect the local industries from the stiff remote rivalry
which can meet important political targets and objectives. Imposing tariffs boost the
country’s development and allow the local industries to industries to develop. If the
tariffs are not imposed, countries may over-dependent on other countries for basic
commodities (Spearot, 2016). The tariffs and import duties levied on imported goods or
services by the domestic market state makes the domestic goods cheaper for the
domestic consumers and make imported goods more expensive for the industries
exporting the good from their industry into the domestic industry. However, when tariffs
are imposed by the domestic government, they decrease the import of a specific
product or service. Moreover, high import duties lead to higher prices for the local
consumer and higher import cost for the foreign producers and suppliers.