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Old 07-02-2018, 12:32 AM
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Tariffs are both a labor protectionist strategy and a way to try and incentivize a trading partner to balance trade.

Protectinist in the case that country X produces Y. They put tariffs on Y imports some times to the point it costs much more to import Y, in order to protect their own labor force.

For example, let's say oranges have a 2000% tariff, it may make it unfeasible to import them for a price that a consumer will pay. This may be done to protect the local orange production.

For a trading "incentive" it's kind of negative, but a way to try and force a trading partner to buy some of your products. So if you produce oranges you try to negotiate down the 2000% tariff so the other country imports more of them, sometimes by raising a tariff on items you import to try and even out the level of what you produce and export vs what you import. This is only effective if you import enough of something else to make the other country give a crap.

Its almost always apples to oranges negotiation because almost nobody produces and exports enough of the same things and has enough of the same demand bidirectionally.

Some times it's just a revenue opportunity for the government.

Ultimately the consumers on both sides lose, and it doesn't do much for stimulating a purchase based economy either.

this is also why you see things like foreign car manufacturers with plants in the destination market or one of their free or lower tariff partners (Mexico and Canada in the case of the US). They import parts from the producer country and assemble the vehicle in the destination market to avoid the higher tariff on vehicles vs parts. Countries accept this because it brings in labor, investment and subsequent taxation so it's a far better deal than just a car being shipped in.