Benefits of Tariffs
Tariffs provide an array of benefits, especially to domestic producers in terms of reduced competition locally. A reduction in competition on the local market in turn causes price fluctuations, which increases job opportunities creating employment for local residents. Tariffs also help government profit which boosts the economy as a whole. This article will discuss the benefits and perks of introducing tariffs in trade.
1. Prevents job loss
In any type of business, businesses are expected to avoid paying taxes. For instance, when British consumers decide to buy low-priced products domestically, overseas producers definitely become disadvantaged, and this in turn leads to minimal trade with US companies. As a result, overseas companies can decide to import their goods to countries where there are no tariffs. In other words, high tariffs impose on imported goods discourage trade and lead to job loss.
2. Restricts competition
Tariffs are often imposed to discourage foreign competition, providing more opportunities for local based companies. Although tariffs typically lead to retaliation, they allow job retention when local producers hire more people to sell their products. Imposing tariffs can however encourage the growth of inefficient firms, while\e other countries place high tariffs on exports.
3. Protects consumers from exploitation
Although the purported benefits of tariffs are still under scrutiny, consumers can benefit from a rise in prices as a result of stiff competition from foreign companies. For example, domestic producers can benefit from agricultural tariffs. As a result of cheaper competition, domestic producers can sell their products to the local market.
4. Increases government revenues
The government collects tariffs to support its many functions. In fact, customs provide about 2 percent of total government revenue. Therefore, the government directly and indirectly benefit from imposing tariffs on exports.
Because tariffs eliminate foreign competition, prices of goods are likely to increase leaving employees with minimal purchasing power.