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In conclusion, universal trade is
very effective when a nation uses its resources more effectively. As such,
nations with the ability to produce goods at reasonable prices have competitive
advantages over those unable to do so. With every nation involved in the free
trade, the global economy is being stimulated. However, when trade barriers are
employed to countries, it reduces the levels of trade ,consequently resulting in
retaliation, leaving buyers to purchase goods at higher prices. Therefore,
tariffs are instrumental factors in any trade since they have several
advantages and disadvantages to both the host and foreign countries involved in
the trade.

Tariffs are imposed to discourage
overseas competition, offering more opportunities for domestic based companies.
Even though tariffs usually trigger retaliation, they promote the retention of
jobs when domestic producers employ more individuals to sell their goods and

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Limits Competition

Businesses of all types will
attempt to avoid taxes. For example, when British consumers choose to purchase
low-priced goods locally, foreign producers obviously become disadvantaged, and
this will lead to reduced trade with overseas companies such as U.S. companies.
As a result, foreign companies can choose to import their products to nations
without tariffs. In other words, high tariffs levied on imported products
discourage trade and cause job loss.

Job loss

One of the foundations of
macroeconomics is that people, government and businesses will avoid taxes. When
consumers of a country decides to purchase a cheaper product of their country,
foreign manufacturers become deprived, finally resulting in less trade with
that particular country. To compete with similar products of a given country,
foreign manufacturers are compelled to cut down their prices.

Discourage trade

Disadvantages of

Imposing of tariffs is debated
frequently. The likelihood of high competition from imported products can
threaten local industries. These local industries may shift production abroad
or retrench workers to reduce cost, which implies an increase in unemployment
and angrier electorate. The unemployment row often shifts to local companies
complaining about cheap oversea labor, and how lack of regulation as well as
poor working conditions permit oversea companies to manufacture products more

Protecting Local Employment

Developed nations can also use
Tariffs to protect industries that are strategically important, for example,
those industries enhancing the national security. The defense industry is
critical to the interest of a country and often enjoys more protection.

National Security

Consumers can benefit from price
increases due to stiff competition from overseas companies. For instance,
agricultural tariffs can benefit domestic producers. Due to reducing
competition, local producers can sell their goods easily to the domestic
market. In addition, a government of a country may impose a tariff on a product
that it believes could pose a risk to its people.

Protects the consumers

Any government of a country
collects revenue to support economically its operation. Increased revenue for
the government is a clear advantage to a country placing tariffs on imported
goods. Essentially, the government imposes tariffs to collect finances to
enable them to operate smoothly. Several studies have reported that the
tariffs, particularly the customs tariffs contribute to 2% of the aggregate
revenues collected by the government. As such, the government indirectly and
directly benefits from levying tariffs on both imports and exports. Tariffs
also play a vital role in maintaining the national security of a country.

Increased revenue for the government

            When a
country decides to place tariffs on imported products, the manufacturers can
choose to pass on the expense to the customers or cut down their prices as
compensation for the tariff. When manufacturers select to pass the levy to
consumers through the price increase, it promotes the local products. In this
case, companies of that country are manufacturing the same products at the same
cost; the foreign goods become costlier.

Promotes the local products of a country

Advantages of tariffs

            Tariffs are
usually an obstacle to trade and are used as a tool to protect domestic
industry (Bacchetta, 2009). Tariffs are also referred as import fees, import
duties, or customs. Every country has its tariff rates, and this depends on the
type of product the country is intending to protect. Besides, a state will
impose sales taxes, various local taxes, as well as additional import duties
fees, which is collected during customs clearance. In nations that have signed
trade treaties with one another, tariffs are waived either wholly or partly
(Bacchetta, 2009). For example, the United States of America has trade
agreements with over twenty nations. Several types of tariffs are available in
the trade between countries. These include the ad valorem and specific tariff. “Specific
tariffs are trade barriers designed to reduce imports into countries” (Business
Dictionary). For example, “a tariff of $5 per barrel of oil” (McEachern, 2015,
p. 282). The Business Dictionary defines ad valorem as duty or other charges
levied on an item based on its value and not based on its quantity, size,
weight, or other factor, for example, “10 percent on the imported price of
jeans” (McEachern, 2015, p. 282). “While arguments about the pros and cons of
the North American Free Trade Agreement (NAFTA) filled the airwaves last fall,
a far more muscular trade accord was being hammered out by the world’s major
economic powers with scant attention paid the proceedings. Now, suddenly, the
agreement reached on December 15, 1993, by the 117 countries party to the
Uruguay round of the General Agreement on Tariffs and Trade (GATT) has set the
stage for the most expansive free-trade regime the modern world has ever known”
(Kelly, 1994). According to the Forum Issue vol 3, multilateral, regional, and
bilateral trade negotiations, as well as non-reciprocal concessions, has led to
some remarkable reductions in global tariff protection. They also stated that
trade barriers related to non-tariff measures (NTMs) may undermine the impact
of falling tariffs.  Bacchetta and
Beverelli mentioned that in 2012, the World Trade Organization (WTO) looked
further into NTMs. They also stated that NTMs have existed since countries
first began to trade.

 “A tariff is a tax on imports” (McEachern, 2015, p. 282). Tariffs are normally imposed
on the imported products based on the value such of products or on the fixed
unit price, once the importer enters a host country. Normally, countries impose
tariffs to fulfill many objectives including but not limited to reducing the
amounts of imports and safeguarding the domestic industries from unprecedented
collapse. Tariffs have several effects both to the foreign countries, hosts, as
well as, people. Throughout this paper, I will discuss tariffs and its pros and

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