|Tariffs Definition for the Freight Industry presented by Apparel Search|
A tariff is a tax placed on imported and/or exported goods, sometimes called a customs duty. A revenue tariff is set with the intent of raising money for the government. A protective tariff, usually applied to imported goods, is intended to artificially inflate prices of imports and "protect" domestic industries from foreign competition (see also effective rate of protection). The distinction between protective and revenue tariffs is moot; revenue tariffs offer protection, and protective tariffs produce some revenue unless they are prohibitive in which case little or nothing is imported of that product, thus resulting in trivial or no revenue. Tariffs are similar to tolls, which are applied to people rather than goods.
Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A customs union has a common external tariff, and, according to an agreed formula, the participating countries share the revenues from tariffs on goods entering the customs union.
If a country's major industry collapses due to foreign competition, the loss of jobs and tax revenue can severely impair parts of that country's economy. Protective tariffs have been used as a measure against this possibility. However, protective tariffs have disadvantages as well. The most notable is that they increase the price of the good subject to the tariff, disadvantaging consumers of that good or manufacturers who use that good to produce something else: for example a tariff on food can increase poverty, while a tariff on steel can make automobile manufacture less competitive. They can also backfire if countries whose trade is disadvantaged by the tariff impose tariffs of their own, resulting in a trade war and disadvantaging both sides.
Some economic ideologies hold that tariffs are a harmful interference with the laws of the free market. They believe that it is disadvantageous for a country to artificially maintain an inefficient industry, and that it is better to allow it to collapse and to allow a new one to develop in its place. The opposition to all tariffs is called the free trade principle; the World Trade Organization aims to reduce tariffs and to avoid countries discriminating between other countries when applying tariffs .
There are two mains ways of implementing a tariff:
Adherents of supply-side economics sometimes refer to domestic taxes, such as income taxes, as being a tariff affecting inter-household trade.