Tariffs: A Quick Definition

Tariffs: A Quick Definition

Anytime you cross an international border you could be subject to declaring the possessions that you have brought along with you.  Even when you are traveling, the act of bringing these things with you across an international border is considered an act of importing or exporting.  Most of the time this act is innocuous: it means nothing, it is insignificant. If you are visiting a friend, for example, you might be bringing a gift with you.  

On some occasions, though, the things you bring with you have great value and that could mean a little more paperwork, as well as the payment of some tariffs. Take your car, for example: if you were to move from the US to Canada, you will probably have to pay a tariff to do so.

What Are Tariffs?

In the simplest of terms, a Clearit tariff is basically just a type of tax, though it is used for specific purposes.  These taxes are assigned to different classifications of consumer goods and are assessed when these goods cross an international border.  The value of these taxes will change, of course, depending upon the type of goods you are trying to transport as well as regulations set by the country of export and the country of import.

Why Do We Pay Tariffs?

Simply explaining what a tariff is does not necessarily give you the full picture of how they work. Indeed, we really need to look at the reasons why we need tariffs to truly understand their meaning and purpose.  Governments assign tariffs as a way to make foreign products more expensive. Sometimes they do this because a foreign company will cut their prices too low that the domestic competition cannot compete (and sometimes, unfortunately, paying their workers very little, if anything at all).  Sometimes they do this to protect emerging industries from fast-growing, low-overhead foreign competition. Basically, then, a tariff is assigned to make some products more expensive than others.

Justifying Tariffs

But there is more to this story:  it is not just about foreign competition.  Sometimes a government can add a tariff to certain imported goods as a political strategy:  It can help to encourage and support trade alliances as well as deter another country from certain behaviors or actions.  Sometimes, too, tariffs can help protect consumers from lower quality foreign products that claim to be authentic as an original domestic product (but in reality are very dangerous).

Categories: Business

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