What is a tariff?
A tariff, sometimes referred to as a duty or levy, is a form of taxation imposed by one country on goods or services imported from another country.
The primary purpose of a tariff is to make goods from other countries more expensive in order to protect domestic producers, suppliers and labor. Prior to the introduction of income tax in the early 20th century, tariffs were the major source of income for governments around the world.
Who pays tariffs?
In one sense, we all do. The company importing foreign goods is expected to pay the tariffs directly to their government once the imported items have cleared customs. That company will then often pass the costs of those tariffs onto the domestic consumer by increasing retail prices.
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Why are tariffs important?
In addition to being a source of income for governments and a means of protecting domestic businesses, tariffs are often used for ulterior motives. Governments can use tariffs to extend their foreign policy, such as restricting trade with particular countries as well as exercising international economic leverage - all through the means of their goods and services.