Tariff
Also called: Customs duty · Topic: International Trade: Patterns, Ports and the WTO · NCERT: Class 12, Ch 8 "International Trade"
Meaning
A tariff, or customs duty, is a tax on goods that cross a border. Most tariffs fall on imports, but some fall on exports. A tariff makes foreign goods dearer, which protects home producers, and it earns money for the government. Countries first imposed tariffs widely during the World Wars. The 1930 Smoot-Hawley tariff in the USA set off a spiral of other countries hitting back with their own tariffs. That lesson led to GATT, and later the WTO, which work to cut tariffs.
Example
In 2019, after the Pulwama attack, India withdrew Most Favoured Nation treatment from Pakistan. This is the WTO rule that every member must get equal trade treatment. India then raised the customs duty on goods from Pakistan to 200%.
Don't confuse with
- Quantitative restriction: a tariff is a tax, so goods still flow at a higher price. A quantitative restriction is a limit on the amount that may cross the border.
- Anti-dumping duty: this is a special extra duty. It is charged only after an investigation proves dumping (selling exports below the home price or below cost) and proves that it harmed home producers.