Question

Tariff Jumping occurs when:

A. A firm that otherwise would have exported to a country instead invests there in order to avoid paying the country’s tariff.

B. A country raises a tariff against a foreign exporter who sells to it below cost.

C. Countries raise (and lower) their tariffs in an effort to stabilize the price of a product on the domestic market.

D. A firm buys inputs from domestic firms rather than importing them from abroad over a tariff.

Choose just one correct answer and provide a clear detailed explanation why you chose it.

Answer 1

"A"

A tariff jumping means when an exported places the good in the destination market by manufacturing the good there rather than exporting it.

Let's take an example of India and US. The US is planning to sell Harley Davidson bikes in India but India has a 100% tariff on imported automobiles. So exporting the Bikes is not an option because then the price of bikes in India after tariffs will be very high and no one will buy it. So Harley plans to manufacture those bikes in India itself that way they will not be paying any tariff because it's not imported i.e. exported from the US. This is tariff Jumping.   

Option B is called anti-dumping charges levied by nations on cheaper products.

Option C is normal exercise by the nations to stimulate market of imported goods.

Option D doesn't make any sense if the firm is importing inputs they have to pay the tariff on them as well if it is levied.