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U.S. Tariffs Unlikely to be Beneficial

U.S. Tariffs Unlikely to be Beneficial

U.S. Tariffs Unlikely to be Beneficial

A tariff is a tax on an imported good. Businesses losing market share due to imports often petition their government to impose tariffs on imports. Tariffs, however, raise the relative domestic price above the relative world price by the amount of the tariff, making the good more profitable for the inefficient businesses and costlier to domestic consumers. When the domestic relative price of the good is higher than the relative world price, the domestic industry production process is inefficient.

Ellis

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