What is a tariff?

A tariff is essentially a tax that a government places on imported goods to make those goods more expensive. This economic tool is implemented with the intention of making domestic products more competitive in terms of pricing by increasing the cost of foreign goods. By raising the price of imports, tariffs can discourage consumers from purchasing these foreign products, thus potentially boosting sales for local producers.

Tariffs can serve various purposes, such as protecting nascent industries, maintaining jobs within the country, or generating government revenue. It's important to understand that tariffs are specifically applied to imports, which distinguishes them from subsidies or financial penalties, and they are not trade agreements, which involve collaborations or negotiations between countries to facilitate trade. This distinction is crucial in grasping the role tariffs play in economic policy and international trade dynamics.