321\. What are Tariffs? (English Vocabulary Lesson)
Thinking in English
Deep Dive
What is a tariff and how does it work?
A tariff is a tax placed on goods, products, or food as they cross a national border, typically paid when goods are imported into a country. It increases the cost of imported goods, encouraging consumers to buy domestically produced items. There are two main types: ad valorem tariffs, based on a percentage of the item's value, and specific tariffs, fixed fees applied to the amount imported regardless of value.
Why does the US consider imposing tariffs?
The US considers tariffs to protect domestic industries from foreign competition, correct trade imbalances, and generate government revenue. Tariffs make imported goods more expensive, encouraging consumers to buy American-made products, supporting domestic jobs and businesses. They also aim to reduce the volume of imports and encourage domestic production.
What are the potential drawbacks of increasing tariffs?
Increasing tariffs can lead to higher prices for consumers, as companies pass on the added costs. They also raise costs for businesses relying on imported materials, disrupt global supply chains, and can trigger trade wars. Other countries may retaliate with their own tariffs, harming American exporters and straining international relationships.
What historical example illustrates the negative impact of tariffs?
The Smoot-Hawley Tariff Act of 1930, passed during the Great Depression, imposed high tariffs on a wide range of imported goods to protect American industries. However, it backfired as other countries responded with their own tariffs, leading to a decline in international trade and worsening the global economic downturn.
How do tariffs affect consumers and businesses?
Tariffs increase the cost of imported goods, which businesses often pass on to consumers, leading to higher prices. Businesses relying on imported materials face increased costs, potentially disrupting supply chains and production timelines. Small and medium-sized businesses may struggle to absorb these costs, impacting their competitiveness.
What are the main arguments in favor of tariffs?
Tariffs protect domestic industries from foreign competition, support domestic jobs, and correct trade imbalances by reducing imports and encouraging domestic production. They also generate additional revenue for the government, which can be used to offset tax cuts or fund public services.
- Definition of tariffs as taxes on goods crossing national borders.
- Explanation of ad valorem and specific tariffs.
- The process of tariff payment and its impact on the supply chain.
- Consumers often bear the real cost of tariffs.