A tariff is a tax imposed on goods or services imported from another country. The assessment can be a fixed dollar amount per item or based on a percentage of the item’s value. It protects domestic markets by increasing the cost for foreign businesses to transact in another country. This limits free trade while promoting domestic jobs and developing industries within a country.
In addition, a tariff can be used as a political tool to discourage transacting with another country or to discourage the purchase of a specific product manufactured by multiple countries. It typically results in higher prices for customers, as it either restricts the supply in the market or results in additional costs for the seller. However, the levy of a tariff results in government revenue for the importing country.