A tariff is a tax imposed by a government on imported goods. It most closely resembles a sales tax that is imposed every time I buy a snicker bar. When I look at the price of this candy it doesn’t mention the tax, however when I get to checkout, by refusing to pay the sales tax, the clerk will tell me to put the stuff back on the shelf. However, if there was no tax, I could buy 11 snicker bars for the total price of 10 and give some to my friends.
A tariff on imported goods, according to my old economic professors at Texas A&M, will increase the price of imported goods and reduce consumption just like my 11th snicker bar foregone. Now we are told that the foreign producers will be so eager to sell their products in America that they will absorb the tax and hold the price the same. I have mentioned this theory to the store clerk about the snicker bar but so far, they won’t let me have that 11th piece of candy.
The father of our economic system, Alexander Hamilton, convinced the fledgling nation in the 1780’s to impose tariffs to give the new nation protection from foreign goods so that an industrial nation could be developed. This is the argument that is being made again today and it will be interesting to see which theory proves correct.
