I’m reading for a quiz and I just ran into this point by an author:
“For a large country that can affect world price through trading, a tariff lowers the price of imports and generates a terms of trade benefit.”
How is this possible? How does it lower the price of imports?
In: 0
My understanding of a Tariff is that it is a tax (additional cost) on imported goods. It is usually used to protect domestic production. If a large country did this it might make those products cheaper for the rest of the world, but the entire point of a tariff is to make the imported product more expensive so that the same domestic product has a price or profit advantage, there by encouraging the domestic production of that product.
Latest Answers