The Core Purpose of Tariffs and Brief History - Educational Blog / Economics

It's likely that there are still many people who don't fully understand the purpose and origin of tariffs while people in power sometimes don't even know when and how to use them. Let's learn more!

Today we're diving into a topic that's as old as trade itself - tariffs. Why do governments use tariffs? How have they been employed throughout history? And what are their real economic impacts?

> The Purpose of Tariffs

Let's start with the basics. What exactly is a tariff? In its simplest form, a tariff is a tax imposed by a government on goods and services imported from other countries. Tariffs serve several purposes:

• Historically, one of the primary reasons for imposing tariffs was to generate revenue for the government. Before the advent of income taxes, tariffs were a significant source of funds for many nations.

• Tariffs are often used to protect domestic industries from foreign competition. By making imported goods more expensive, tariffs encourage consumers to buy domestic products, thereby supporting local businesses and jobs.

• Tariffs can also be used as a bargaining chip in international trade negotiations. By imposing or threatening tariffs, governments can push other countries to lower their trade barriers or make other concessions.