Why do you think that the U.S government puts tariffs on imported goods from foreign countries?
Answer:
tarrifs is a sort of a barier to trade. When barriers are imposed we say that domestic indutry is being protected from foreign competition. Barriers to trade are therefore sometimes referred to as protection. So why do we imose tarrifs or barriers there are a number of reasons:
1- To protect an infant industry: A very popular argument for protection concerns a domestic industry in the early stages of its life. This industry may be prevented from growing because it is unable to compete with cheaper imported goods.
2- To reduce a balance of payments deficit: by reducing imports it is possible to reduce the balance of payment deficit.
3- To encourage reallocation of resource: Countries are some times faced with the problem of declining industry.The problem is that when an industry declines suddenly, the people who work in that industry become unemplyed. This is particularly serious when the industry is highly localised . protection can be used to as a way of reducing the impact of the decline in a major industry.
4- To eleminate unfair competition: One argument sometimes suggested for protection is that advanced economies like that of the U.S, cannot compete with products from third world countries because labour costs in these countries are much lower.
5- Strategic arguments: Despite the benefits of specialisation and trade, countries might protect certain industries deliberatly to avoid becoming dependent on another country for their continued supply. Countries might fear that, in times of war or economic blockade the supply of commodities on which they depend, such as food and raw materials, might be cut off.
To prevent the devaluation of the American dollar and to prevent the U.S. from becoming dependent on foreign goods.
One reason and one reason only:
It helps politicians get votes of small united voting blocks of people.
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