Question

Discuss reasons why a tariff on imports is typically regarded as a more desirable policy instrument when it is compared with an import quota. ( maximum word limit: 250 words)

Answer 1

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Generally, the tariff is the form of tax which is imposed on the imported goods at the borders of the country. Any country uses tariffs in order to provide easy market access or to restrict them in order to protect the domestic industry. It also derves the need of collection of the revenue and to gain some strategic objectives by giving are denying tariff concessions to the countries. Tariff also may harm the export competition due to the availability of cheaper raw materials and also intermediate product support making of competitively priced and finished goods for the export markets. Also the challenge for entreprenuers is to find them the cheaper inputs.In case if these inputs aren't available domestically at competitive prices they will look to source them from outside but as high tariifs act as barriers to the sourcing cheaper inputs they will undermine except competitiveness of a particular product.

Also let us take an instance of an incident that happened in U.S, that US president TRUMP had imposed huge tariffs on the steel and aluminium that is imported from all nations excluding Canada and Mexico. Due to this decision 25% of duty on steel will increase the domestic steel price by 5% which will lead to an increase in the input cost for some industries for other leading o high cost of their products for the customers. The US duty on Steel and Aluminium also mean that global surplus would have to be dumped in some other nations at the lower prices. Also the steel sector has already troubled with excess capacity which will face more turmoil.