A tariff is a tax paid on goods when they pass national borders. The tax is often collected by the country’s government importing the goods. Tariffs are sometimes referred to as customs duties. The primary benefit of tariffs is the generation of revenue from selling products and services imported into the country. When administered consistently throughout both countries, tariffs can also be a jumping-off point for negotiations between the two nations. The General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), and other trade agreements all use the regulation of tariffs to bring governments and businesses together to establish economic policy.
The intended benefit of implementing tariff barriers is to first serve as a means of earning money. Revenue from tariffs is a source of income for governments, allowing them to fulfill their job as revenue generators. Although the prominence of the revenue function has been diminished in industrialized countries due to economic development and the implementation of systematized domestic tax legislation, it continues to play a considerable role in developing countries. In some still-developing countries, tariffs may still play a vital part in generating money.
Second, tariff barriers are used to protect indigenous industries. They change the conditions under which goods compete, creating an environment where imports are at a disadvantage to their domestic counterparts. The main idea is to order to protect domestic industries. At the very least, a cursory examination of the tariff rates of the various nations gives the impression that they reflect the competitiveness of the local industries in those countries. Lastly, tariff barriers are used by the government to correct trade inequalities. Correction of imbalances resulting from actions taken by other nations might involve implementation of punitive tariffs. For instance, the anti-dumping duties are implemented to prevent cases of injurious dumping.