A tariff is a tax imposed by a government on imported or exported goods. Tariffs are used primarily to generate revenue for the government and to protect domestic industries from foreign competition by making imported goods more expensive.
There are two main types of tariffs:
-
Ad Valorem Tariffs: These are calculated as a percentage of the value of the imported goods. For example, if a product is valued at $100 and the ad valorem tariff rate is 10%, the tariff would be $10.
-
Specific Tariffs: These are fixed fees based on the quantity or weight of the goods, regardless of their value. For instance, a tariff of $5 per kilogram would mean that for an imported item weighing 10 kilograms, the tariff would be $50.
Tariffs can influence trade policies, impact prices for consumers, and affect the overall economy by altering market dynamics between domestic and foreign producers.