Taxes and tariffs on imports Essay Example | Topics and Well Written Essays - 2500 words

Taxes and tariffs on imports - Essay Example Second, they create tax revenues for the governments imposing them. In spite of what the goals are, tariffs may not be the most direct or efficient means attaining them. For instance, foreign sellers may reduce their prices to counteract any tariff increase. The net effect is for the consumer-paid price to be different only to some extent, if at all, from the price before the tariff was imposed. As a result, the nation has larger tariff revenues but slight additional protection for the domestic producers. When tariffs do elevate the price of an imported good, consumers are put at a disadvantage, while the import-competing industries are put at an advantage. On the other hand, tariffs can have wider implications. For example, when the U.S. Department of Commerce imposed a high duty on complex flat screens used on laptop computers, the duty was an advantage to some small U.S. screen manufacturers (Salvatore 2005). But it damaged companies such as Apple, Compaq and IBM, who disagree tha t the high duty exaggerated the cost of their products, destabilized their ability to compete abroad and forced them to shift production to other countries. This papers looks at the impacts of tariffs or taxes on imports on a large economy (the U.S.) and a small economy (Kenya). Import tariffs may be of the predetermined variety or they may be ad valorem. Characteristically the importing firm pays the tariff as a tax to the government of the importing country. In order to recover the cost of the tariff the importer charges customers a price at least equal to the import plus the tariff. Because of the tariff, the domestic price of the imported item becomes higher than it would have been with free trade. Imposing taxes or tariffs on foreign products is a form of controlling trade; they are enforced by governments for a variety of reasons. One purpose is simply to create revenues. Another purpose is to lessen the competitiveness of foreign products by