So what is tariff actually, and how does it affect the collecting country and the global economy? The following is an economist's explanation:
Tariff is one of the oldest trade policy tools.
Simply put, tariffs are taxes levied on imported goods. There are two kinds, one is to levy a fixed fee for each unit of imported goods, such as $300 per ton of imported steel. The other is "ad valorem" tariff, that is, a certain proportion of tariffs are levied according to the value of imported goods, such as 20% of the import price of imported cars.
It is reported that tariff is one of the oldest trade policy tools, and its use can be traced back to18th century. Historically, the main purpose of tariffs was to increase income.
In modern society, the main purpose of tariffs is often to protect specific domestic industries from competition from foreign enterprises, while increasing income.
2. Raising tariffs usually produces three kinds of trade effects.
The influence of tariff depends on the proportion of a product in the total national trade, which determines the trade effect of a product and has an impact on the international price of this product.
For example, C? te d 'Ivoire is the world's largest exporter of cocoa beans, with an annual export of US$ billion, while the Netherlands is the largest importer of cocoa beans. Therefore, the trade policies of these two countries may have a significant impact on the price of cocoa beans in the global market.
Therefore, if the Netherlands raises the tariff rate of cocoa imported from C? te d 'Ivoire to protect Dutch cocoa bean growers, there will usually be three trade impacts.
First of all, the price of imported cocoa beans will rise, which will increase the cost for domestic consumers to buy this product.
But it is good for Dutch growers, because they produce cocoa beans cheaper than imported ones, so the demand side of cocoa beans will buy more local products.
Secondly, the export price of cocoa beans will be reduced. If C? te d 'Ivoire wants to export cocoa beans as before, it can only reduce the price, because it can't compete with local Dutch growers without reducing the price. In the end, this leads to the loss of cocoa growers and producers in C? te d 'Ivoire, which in turn affects the country's economy.
Economists call it the "terms of trade gain" of Dutch tariffs, which ensures that the price of Dutch cocoa will not rise.
Finally, due to the decline in demand and supply of commodities, the total product trade between the countries concerned has decreased.
However, if the trade volume of cocoa beans in a certain country is very small, then raising tariffs on cocoa beans will only have two effects: commodity prices will rise, domestic consumers will have to pay more, and there will be more manufacturers and sellers.
In the end, the trade volume of cocoa beans in this country will decrease, but it will not affect the global price of cocoa beans.
3. Benefits and costs of raising tariffs
For a country, the benefits brought by tariffs are uneven. Raising the tariff on a certain product means that the price of this product will rise in China, which will eventually increase the cost for consumers.
If the benefits of raising tariffs outweigh the increased costs, then the country will benefit from tariffs. If not, then it will be lost.
For a small country with no market influence, it is not worthwhile to raise the tariff of a product, because it cannot affect the global price of a product.