Tariff

Most countries are limited by their natural resources and ability to produce certain goods and services. They trade with other countries to get what their population needs and demands. However, trade isn't always conducted in an amenable manner between trading partners. Policies, geopolitics, competition, and many other factors can make trading partners unhappy.

One of the ways governments deal with trading partners they disagree with is through tariffs. A tariff is atax imposedby one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages.

Tariffs are used to restrict imports. Simply put, they increase the price of goods and services purchased from another country, making them less attractive to domestic consumers.

A key point to understand is that a tariff affects the exporting country because consumers in the country that imposed the tariff might shy away from imports due to the price increase. However, if the consumer still chooses the imported product, then the tariff has essentially raised the cost to the consumer in another country.