What is a protective tariff?

Protective tariff is the financial decision of the government to use tax on the import of foreign goods. This tariff is used many times to inflate import prices to protect the value of domestic goods that can be produced in the home country. This type of tariff is considered to be a free trade threat to some, but others say that its benefits are double. The first is to maintain domestic money within your own economy. The second advantage is to prevent cheap imports to destroy local business.

The example of a protective tariff is observed in the import of oranges. Citrus fruit does not easily grow everywhere, and South American countries often produce a huge amount for exports. If the country can produce oranges, but can import them from South America cheaper than their growth in the domestic market, a protective tariff can be used. This tariff inflates the price of imported oranges so that they are the same or higher than the price of domestic orangues.

Some argue that importing solutions in this way is unethical. Claims that shipping costsshould be the only addition to the price of the item. The introduction of protective tariffs, the argument states, threatens the idea of ​​having free trade.

At the opposite end of the spectrum, there are two arguments in favor of protective tariffs. One of them is that it maintains the money earned locally in the domestic economy. The idea is that if a person earns a paycheck from a local business, one should feed this money back to other local businesses and create a support cycle. By buying cheaper imported goods, this person does not give his money to domestic business, but directly to foreign economies. Theoretically, it creates a hollow economy that does more to support foreign business and less to support themselves.

The second argument in favor of the protection tariff is that it prevents unfair permissions of the competition. This view states that if South American oranges were imported without tariff and at much lower costs than dThey are tanned by oranges, consumers would buy those over more expensive domestic oranges. This would burden the domestic orange growers and may have removed them from business. In this case, the protection tariff aims to balance the competition for domestic companies.

Protective tariffs are controversial plans to solve the import of goods. Some consider these import taxes a necessary means of protecting the domestic economy. Others believe it is a threat to free trade.