The mention of increasing tariffs on imported products quickly creates a stir in any market. Increasing tariffs are used to protect domestic industries, but critics express concern over the negative economic impacts it may unleash. In this essay, I shall discuss the relevance of increased tariffs in the modern economy, and the potential repercussions it may have on the economy.
Tariffs are used as a form of taxation imposed on imported goods, essentially shielding domestic industries from external competition. By increasing the cost of imported items, it gives a competitive advantage to industries that are producing similar products within the jurisdiction. When tariffs are used in conjunction with quotas and subsidies, it further strengthens the market grip of the domestic industry, boosting domestic production and employment opportunities.
In modern times, tariffs are often implemented for the purpose of protecting specific industries from international competition. The motivation behind such decisions is to support employment, but it also increases the cost of the final product to domestic customers. This often leads to an increase in the inflation rate, and in some cases, may also cause disruption to existing trade agreements in various sectors.
Some economists argue that such tariffs are usually counter-productive as they impose additional costs and complexity to the trading systems, making it difficult for businesses to compete globally. Also, increased tariffs often result in retaliatory actions from countries, leading to a trade war situation. Moreover, they reduce the scope of efficient resource allocation and hinder the growth of a competitive international market.
Despite these potential inadequacies, experts are of the opinion that properly planned strategic tariffs can be used to manipulate the domestic markets to meet the policy agenda. Furthermore, to deter firms from attempting to sidestep tariffs, provisions such as rules of origin and preferential tariffs can be put in place. This may be beneficial for countries who are willing to spur economic growth and maintain their competitive advantages.
In conclusion, increased tariffs form an effective tool for protecting domestic industries, manipulating the markets, and stimulating economic growth. However, the impact of such tariffs on the international market varies largely, and should be thoroughly and objectively examined before implementation. There is no definite answer as to whether increased tariffs are beneficial or detrimental, as a combination of the two scenarios can be the end result. Ultimately, it boils down to the purpose of implementing the tariffs and the end goals to be achieved by the countrys decision-makers.
