Foundations of Economics, 8th Edition

9.3 International Trade Restrictions

MyEconLab Concept Video

Governments use four sets of tools to influence international trade and protect domestic industries from foreign competition. They are

• Tariffs

• Import quotas

• Other import barriers

• Export subsidies

Tariffs

A tariff is a tax that is imposed on a good when it is imported. For example, the government of India imposes a 100 percent tariff on wine imported from California. When an Indian firm imports a $10 bottle of Californian wine, it pays the Indian government a $10 import duty.

Tariff

A tax imposed on a good when it is imported.

The incentive for governments to impose tariffs is strong. First, they provide revenue to the government. Second, they enable the government to satisfy ...