Tariffs, Imports & Exports

Economics: Lesson 65

“Does a tariff on imports also reduce exports?”

Tariffs are sales taxes disguised as tools to save jobs. They are used to protect producers from competitive foreign markets and make it more difficult for the country to import foreign goods. This is great for the producers but bad for the customers. Now that the competition is reduced, the producers can sit back and relax and not worry about losing their business to a better foreign competitor. They get lazy and now the quality of the goods goes down and the prices go up. While limiting the number of imports is beneficial for the domestic producers at the moment, what they don’t realize is that it is also reducing exports.

Tariffs often apply to exports as well as imports making it difficult for a country’s producers to sell goods to other nations. With increased tariffs, foreign buyers will look to buy goods from another source that will supply the goods at a cheaper rate. And while foreign competitors become better at making goods at reduced prices, the domestic producers are becoming more inept and unable to compete in the international market. There cannot be reduced imports and not exports, it doesn’t work.

A foreign competitor might have wanted to buy something on the other side of the border. But, since relations have been cut off, they no longer want to deal with that side of the border. If a foreign competitor cannot get access to money on the other side of the border by means of selling something, then he ultimately cannot buy anything. He has no money.

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