What are tariff barriers?

When goods are traded between countries, there is typically a fee charged for a good entering a different territory. These fees serve two functions: first, they provide governments with a (relatively small) amount of income; and second they make foreign goods more expensive – as the cost of a foreign good includes the tariff – helping domestic producers to compete with foreign goods.

Although this might seem like a good thing to do from a domestic perspective, charging tariffs most often causes reciprocal action against domestic goods entering foreign markets, making it more difficult for domestic producers to sell abroad.

Because of this, tariffs are generally seen as a barrier to trade, as they increase the price of goods for everyone, which makes them less attractive to consumers and reduces the volume of trade.

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