International Trade and Tariff

1 January 2017

Tariffs Explain the various impacts of an import tariff in small nations vs. large nations. The impact of an import tariff in a small nation is entirely unlike then an import tariff from a larger nation. When smaller nations imposes a tariff, it does not affect world prices, however the price of the importable commodity will start to rise, usually by the amount of the tariff for manufacturers and trade in the small nation. When large nations impose a tariff, it will reduce the volume of trade. Large nation tariffs also improve terms of the nation’s trade. Since the volume of trade is being reduced, it tends to lesson the nation’s welfare.

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However it also can improve the nation’s welfare. It depends on the welfare of the nation to if it actually rises or falls depending on the two conflicting forces. What are the three main reasons governments prefer using a tariff to restrict imports versus quotas? A few reasons why tariffs are better option than import quotas is because, tariffs can generate revenue for the Government, import quotas can lead to administrative corruption, and import quotas can cause smuggling. The reason the government can make money off of tariffs is because there can be a percentage put on imported goods that will generate extra money.

There are millions of different things that are imported into a country and the small percentage of tariffs generates a lot of revenue that would be lost of the government unless their trade had an authorizing fee on goods being imported. This can lead to administrative corruption, if there are no restrictions on importing goods then the government has the ability to pick and choose who can import and who cannot. This can give the custom officials a lot of power since they would have the ability to favor and only allow certain corporations. Tariff system helps to rid the possibility of corruptions.

This not just the price, but also the quantity sold through supply and demand. Smuggling can occur with an import quota when there are large shortages. A tariff cannot provide a set number on the goods or products that are coming into the country so the number of imports will increase when the demand for it goes up. Should our government use a weak dollar exchange rate policy to make imports more expensive in order to help our exporters? The weakening of the U. S. dollar means that the dollar has fallen in value compared other currency. The weak dollar is good for exports, but not good for importers.

The value of currency will decrease when the demand for that specific currency is low, which will make importing goods more expensive. A weak dollar can make things difficult for exporters that are selling to the United States. If a foreign company wants to sell goods to the U. S. it either needs to up the price of the product or sell it at a lower price because of the exchange rate. What roles do the IMF and WTO play in trade and the use of tariffs? The IMF or International Monetary Fun is an global business of countries that strives to guarantee the constancy of the worldwide financial and economic system.

The IMF tries to make sure that there is balanced growth to international trade, it promotes exchange constancy and helps to give countries a way to balance payment issues. Tariff rate data comes from the IMF database and the country’s authority figures. The WTO or World Trade Organization is a global company that works on the rules of trade between two countries. It helps to ensure that international trade moves smoothly and generously. It also gives countries a helpful and just outlet for dealing with arguments over importing issues.

The WTO regulations permit a nation to defend certain businesses if the elimination of tariffs would have detrimental side effects, such as the loss of necessary national trade.

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