- Tariffs protect the local and smaller companies from international competition. It also guarantees business prospects for the smaller companies that can be eaten away in multinational competition.
- They help to protect the country from dumping by multinational companies. Dumping is a situation where the foreign companies start offering products at much lower costs that the domestic companies cannot survive the competition, and they are forced to close down. This way, the foreign company will rule the market.
There is a two way impact of tariffs on every country’s economy. Tariffs can impact the economy of the country that it has been imposed in, and the country it is being imposed on. The World Trade Organization estimates that if trade tariffs are removed globally, then the world economy will increase 15 times by 2015.
When it comes to tariffs, only the economy cannot be considered. The impact on the country and its people should also be taken into account. There will be trade imbalances. Companies will start favoring specific kinds of products. Other unwanted products will disappear from the market. Local people depending on such products may be at loss.
However, there are other economists think that governments are hampering prospective trade by imposing tariffs. They are slowing down the world’s economy, and, in fact, incurring losses. The World Bank believes that a trade tariff is a loss for all the countries.
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