Impact of Trade Barriers
Protective Tariff- designed to protect
domestic producers against foreign
competition
Revenue Tariff- is applied to a product that is
not domestically produced to provide the
government with money.
Example: Bananas or Coffee
Voluntary Export Restriction (VER)- is a trade
barrier where foreign firms voluntarily limit
the amount of their exports to a particular
country. VER is usually done to prevent
further more strict tariffs
Example: Canada Lumber
Economic Impact of Tariffs
Decline in Consumption
-Higher prices
-Consumers will buy less of the product
-settle for less desired cheaper substitute
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-settle for less desired cheaper substitute
Increased Domestic Production
-U.S producers receive the higher price
-Increases supply of the product
-U.S producers get higher prices and
increased sales
-This is why domestic producers lobby for
tariffs
Decline in Imports
-foreign producers get hurt
-money from tariff goes to U.S government
not the foreign producers
Tariff Revenue
-money from the tariff money goes from the
consumer to the government
-money does not benefit the economy
Indirect Effect
-Foreign Country earns less money because it
is not selling as many exports.
-has less money to spend on imports from
U.S
-causes resources to shift in wrong direction
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-causes resources to shift in wrong direction
Economic Impact of Trade Quotas
-forces foreign countries to export to other
countries other than the U.S
-cutting supply increases the price
-consumption goes down
-U.S production goes up
-Impact that is different than the tariff is that
the extra cost goes to the foreign country
producers not the government
Exit Question: What are the five economic
impacts of tariffs?
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