Taxes levied by a government on the movement of goods across economic, political and geographical boundaries. Tariffs are commonly associated with protectionism, a government’s policy of maintaining control of trade between nations to support its own interests. For economic reasons, tariffs are usually imposed on imported goods. The five main types of tariffs include revenue, ad valorem, specific, prohibitive and protective.

A revenue tariff increases government funds. For example, countries that do not create their own natural products such as cotton, bananas or tabacco may create a tariff on importing them. Revenue is then generated for the Government from the business doing the importing. An ad valorem tariff is a tariff applied to a percentage of the import’s value.  A specific tariff is a tariff not applicable to the estimated value of the imported goods, but instead based on specific quantity of the goods. A specific tariff may apply to the amount of goods imported or to the weight, volume or other measurements. A prohibitive tariff is one that is at such a high cost that it deters the item from being imported. A Protective tariff is a tariff imposed to protect domestic firms from import competition.

See also:
Trade barriers