Tariffs and Our Economy
Our listeners may be hearing a lot about Tariffs in the news. By definition, a tariff is simply a tax on imported goods. Tariffs are used to restrict imports by increasing the price of goods and services purchased from overseas and making them less attractive to consumers. A specific tariff is levied as a fixed fee based on the type of item, for example, $1,000 on any car. An ad-valorem tariff is levied based on the item's value, for example, 10% of the car's value. Governments may impose tariffs to raise revenue or to protect domestic industries from foreign competition. By making foreign-produced goods more expensive, tariffs can make domestic-produced ones more attractive. By protecting these industries, governments can also protect jobs. Tariffs can also be used as an extension of foreign policy: imposing tariffs on a trading partner's main exports is a way to exert economic leverage. Tariffs can have unintended side-effects, however. They can make domestic industries less efficient by reducing competition. They can hurt domestic consumers, since a lack of competition tends to push up prices. They can generate tensions by favoring certain industries over others, as well as certain regions over others: tariffs designed to benefit manufacturers in cities may hurt consumers in rural areas, who do not benefit from the policy and are likely to pay more for manufactured goods. Finally, an attempt to pressure a rival country using tariffs can devolve into an unproductive cycle of retaliation, known as a trade war.
Joining us for our discussion on Tariffs and Our Economy is Edward Goldberg who is calling in from his New York Office. Edward Goldberg is a professor of international political economy at New York University’s Center for Global Affairs. He is also a leading expert on globalization and the interplay between global politics and global economics, his views are sought after by corporations, governments, print and electronic journalists.
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