Kategori: X-tra

A tariff is a tax that a government charges on imported goods (products brought in from other countries). Usually, a tariff is an added cost on imported goods and services, which is normally passed on to the consumer.

Why Do Governments Use Tariffs?

• Rescue for the Government – Taxes collected from imported goods and services help fund public services.
• Protect Local Businesses – Makes imported goods cost more, so customers buy local.

• Trade Measure – If a country is trading unfairly, tariffs can be used as leverage to negotiate better trade terms.

Example: The Toy Story 

Imagine:

Malaysia makes teddy bears for RM 20 each.

China also makes teddy bears but sells them for RM 15 (cheaper because of lower labor costs).

Without Tariff:

Malaysians buy Chinese teddy bears because they’re RM 5 cheaper.

Local toy makers lose business.

With 20% Tariff:

China’s teddy bears now cost RM 15 + 20% tax = RM 18.

Malaysians think: “Hmm, local bears (RM 20) are only RM 2 more… I’ll support Malaysian-made!”

So, Local toy makers survive. It ensure fairness for local product to compete with exported product.

Good or Bad? It Depends!

Good for: Local workers, factories and governments.

Bad for: Consumers (pay higher prices) and exporters (lose sales).

Think of it like this to in simpler terms:

Tariffs are like a “shield” for local businesses.

But if used too much, they can start a trade war, where other countries retaliate in the same manner by increasing tariffs on your exported products and services.

Quick Summary

Tariff = Tax on Imports
Goal = Help Local Businesses
Side Effect = Higher Prices