Restrictions of free trade 4.1.6.2

What is an import tariff?

A tax on imported goods, also called an import or customs duty.

What are the uses of an import tariff?

Protectionism (raising imported goods' prices) and government revenue.

How can a supplier respond to an import tariff to remain competitive?

Absorb the increased cost instead of raising prices.

Why are most paper clips sold in the U.S. still domestically manufactured?

A 127% tariff on Chinese paper clips, imposed to prevent dumping.

What was the purpose of the U.S. tariff on Chinese paper clips?

To stop Chinese firms from selling at a loss and undercutting U.S. manufacturers.

How does the U.S. tariff system affect canned tuna imports?

A 35% tariff on Ecuadorian canned tuna protects U.S. manufacturers.

How do U.S. tuna manufacturers exploit a tariff loophole?

They outsource fish cleaning abroad but package domestically to qualify as U.S.

Why do Nike and Adidas face higher costs in the U.S. compared to New Balance?

A 20% tariff on foreign shoe imports protects U.S. producers like New Balance.

How have tariffs protected the U.S. tobacco industry?

High tariffs (up to 350%) on foreign tobacco products since the Great Depression.

How did China retaliate against U.S. trade policies in 2018?

Imposed a 25% tariff on 100 U.S. products, including tobacco.

Why did North Carolina oppose China’s 2018 tariff increase?

The state exported $156 million in tobacco products to China in 2017.

What are the positive effects of import tariffs?

Higher government revenue, increased producer surplus, more employment, and a better balance of payments.

What are the negative effects of import tariffs?

Higher consumer prices, cost

Why do tariffs lower overall economic welfare?

They create deadweight loss and artificially sustain inefficient firms.

What is the impact of an import tariff on domestic output?

Expansion – Higher prices from tariffs incentivize increased output.

How does an import tariff affect domestic demand?

Contraction – Higher prices reduce consumers' real income.

What happens to import volumes when a tariff is imposed?

They fall – Consumers switch spending towards domestic production.

How does an import tariff affect government tax revenue?

It increases – The tariff generates revenue for the government.

What is the impact of an import tariff on domestic producers' revenue?

It increases – Higher prices lead to a rise in producer surplus.

How does an import tariff affect foreign producers' revenue?

It falls – Lower exports reduce their revenue.

How does an import tariff affect consumer surplus?

It falls – Consumers pay higher prices.

What is the overall impact of an import tariff on economic welfare?

It falls – Tariffs create a deadweight loss and reduce efficiency.

How do domestic producers benefit from an import tariff?

They are protected from cheaper imports, leading to higher output and revenue.

What is a possible inefficiency caused by an import tariff?

X

How do foreign producers suffer from an import tariff?

Lower demand reduces their revenue and profits.

How do tariffs affect consumers?

They face higher prices, reduced real incomes, and limited choices.

Why might tariffs be regressive?

They disproportionately impact lower

How do tariffs affect government revenue?

They initially increase revenue but may slow growth if retaliatory tariffs arise.