Apart from that, imposition of import tariffs offsets the negative effects of exceeding imports on the Balance of Payments and Balance of Trade of the state. This is essentially good for the countries that have less developed economies and produce little industrialized goods to export to other countries. Influx of foreign commodities in less developed states poses an economic threat to their domestic industries. Such states can protect their domestic industries by imposing import tariffs on foreign goods and making them more expensive for consumers to buy them. As a result consumers will stick to buying domestically produced goods (Stanlake & Grant, 1997).
While imposing tariffs might seem a lucrative idea to many states, it brings with it a lot of demerits as well. Since international trade works on two way lines, imposition of import tariffs by one country's government on another country's good may provoke other countries to put trade barriers on that country. As a result, the country might lose important export markets which may...
This may further result in depreciation of exchange rates. Economists also argue that if all states will start imposing import tariffs, international trade in all the countries will be hindered. These mean consumers in all the countries will have less freedom of choice and standards of living will be low.
Conclusion
Whether to impose import tariffs or to allow a free trade is still a heated debate among economists. What choice a state makes would depend on the conditions of state. If the deciding state is a developing economy with a high volume of imports coming in as compared to the exports, it should consider imposing import tariffs. However, for more developed economies free trade is a better choice.
Reference List
Lipsey, R. & Chrystal, a. (1997). An Introduction to Positive Economics. Oxford, U.K: Oxford University Press.
Stanlake, G. & Grant, S. (1997). Introductory Economics. Singapore: Longman.
