It is generally thought that the imposition of the tariff will help the domestic economy of a country to recover from unhealthy competition from the foreign market. In some aspects it is true, and the advantages of taxing imported goods can be understood by understanding the following points:
- The fruition of the domestic market
The presence of cheap foreign goods makes it impossible for the domestic producers to compete with these goods in terms of price. For instance, if the labor costs in a particular country are quite high then the sale price of goods thus produced will also be high. But, if the same gods are made in a country at a lower price due to the cheap availability of labor, then the business owner in that country can export the good to the other country and offer a reduced price to the citizens of the foreign country and still make a profit. But if the tariff is imposed then the profit margin vanishes due to the overall increase in the price of the goods during import, so this will prevent the cheap availability of imported goods, and the domestic business owners will get a chance to get their goods sold.
- Dying industries can be revived
The industries which supplied raw materials to the company owners were nipped due to the provision of imported raw materials. When raw materials are available from outside at a suitable price for growing companies in a country, then those materials will be readily used, and the industry which was present in the country for the production of the same raw materials will slowly become nonexistent. Therefore the tariff will improve the condition of the barely running businesses in the country by making it difficult for the home companies to gain foreign goods for production easily.
- More job opportunities will become available
It is quite clear if the industries of the country are refurbished then the need for a greater workforce will become palpable which will create vacancies for different jobs. This will offer employment to more people, and so the citizens of a country don’t have to look for employment opportunities outside their country.
The tug in the personal felt due to the imposition of a tariff
The problem that is created by the imposition of the excess tariff is that the consumer is going to get the raw end of the stick. This is true because the companies that work with imported materials or products have to pay the extra bucks for bringing the product and this will imply a higher cost of construction. This will definitely impact the consumers because the companies are not going to cut their gains for making the product, so the amount given due to the increase in tariff is taken back from the consumers by raising the prices. This is the general practice, and this is why the consumers are worried whenever tariff impositions are made.
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The notable problems that are faced by general consumers due to tariff changes
Theorist and economist focus on the overall development of the economy of a country when a change is brought in the economic structure of a country. The increase in tariff is supposed to bring about positive changes for the domestic industries and the overall economic status of a country. But there are certain problems which are faced by the consumers due to the introduction of such changes. Some of these changes are discussed below:
- The cessation of multiple choices
If a country successfully blocks the import of products from all foreign countries, then it will definitely help the domestic business owners. But then it will also result in a monopolistic, and the consumers who had several choices from both domestic and foreign traders have to depend only on the products made by the domestic industries. Even if the number of choices is too few, the consumers won’t have the opportunity to look for more choices.
- Effect on innovation
In simple terms, it can be understood as the lax attitude of service providers on the development of better products due to complete obliteration of competition. The presence of competition is necessary because this will lead to comparison and will force company owners and service provider to upgrade their goods to meet the standards of competition. But if the competition is eliminated, then there is no standard with which the domestic companies have to match up to. This will negatively affect the quest for innovation among product developers.
- The rise in the cost of general goods
If the tariff is imposed on all types of goods, then even a soda-can can become expensive if it is imported. The companies that have acquired high cost imported materials due to tariff will increase the price of the finished product which will be purchased by the consumer. For a normal individual, the sudden price elevation will make the budget go haywire. For example, if a pair of jeans has to be bought and the price is overboard due to the tariff, then the consumer has to either ditch buying the product or buy the generally expensive products from the domestic market. In both instances, the budget of the consumer has to suffer the load of excess payment.
- Investing in a foreign market
If stocks are present in the foreign market, then the price will go down which isn’t a suitable situation for people who have invested hugely in foreign stocks.
Even though some problems discussed here is a result of speculation yet, it cannot be said with certainty that the tariff change won’t impact the consumer market to a great extent but only time will tell if the change yields positive or negative results.
