What is a protective tariff?

What is a protective tariff?

A protective tariff is an import duty imposed on certain commodities to protect domestic industries from foreign competition.   A protective tariff is a tax on imported goods, designed to make them more expensive than domestically produced goods. The aim is to protect local industries by making foreign products less competitive in terms of price.

Reasons for a protective tariff 

1.  To correct balance of payments problems.
2.     To protect domestic industries from foreign competition.
3.     To generate revenue.
4.     To discourage dumping.
5.     To prevent the importation of dangerous goods.
6.     As a political weapon.
7.     To protect jobs/prevent unemployment.

Reasons against a protective tariff.

1.     It limits the level of variety of goods available in the country.
2.     Other countries may also retaliate.
3.     It may lead to an increase in the price of goods especially if the tariff is too high.
4.     Fall in the standard of living due to high taxes on imports.
5.     Overprotection of domestic industries may lead to inefficiency.