What are tariffs, and how do they influence trade?

Tariffs are taxes imposed on imported goods, making foreign products more expensive in comparison to domestic goods. By raising the prices of these imported products, tariffs discourage consumers from purchasing them and encourage the purchase of local alternatives. This can lead to increased revenue for the government as well as protection for domestic industries, allowing them to compete more effectively against foreign competitors.

In the context of trade, tariffs can serve as a tool for governments to protect local economies from foreign competition, potentially fostering local job growth and supporting local businesses. However, while this might shield domestic industries, it can also lead to trade tensions and retaliation from trading partners, possibly resulting in a decrease in overall trade volume.