Trade Barriers A trade barrier is a general term that describes any government policy or regulation that restricts international trade. It is like a wall that affects trade between countries

Tariff: What is it?

It is a tax placed on certain goods that are traded from one country to another

What will a tariff do? It is a trade barrier that creates “protectionism.” It will help a country “protect” its businesses. When a consumer buys a foreign made good, businesses in that country don’t make money.

So……. So, governments want to protect businesses that are based in their country. This helps keep jobs for people of that country.

How does it work? It’s pretty simple. A government puts a high tax on certain goods that are sent in from a different country.

Consider the purchase of a television. It seems that if you bought a tv that was made in another country, you would pay less

But….if a tariff is placed on the tv coming from another country, it becomes more costly. This usually means that people will buy the item that is made in their own country, because it is less costly tariff = 600

You might be surprised…. Goods that currently have tariffs

Embargo: What is it? A type of trade barrier where trade with another country is prohibited

What will an embargo do? The purpose is to put that country in a difficult economic situation

Why would a country impose an embargo? It is usually considered a punishment over a previous political act-

A big one…here in our own country The United States sold arms to Israel when Israel was attacked in the Yom Kippur War. This was in 1973.

The Seven Sisters(Middle East OPEC countries) imposed an embargo on the United States, Do you know what that embargo was?

It wasn’t pretty…..

Quota: What is it? 35 divided by 5 = 7 The quotient is 7

But, but, but!!! We said “QUOTA,” not quotient.

Yes, and they both have something to do with numbers! An import quota is a type of trade barrier that sets a limit on the amount of a good that can be imported into a country. Only a certain number of items can be imported. Get it? It’s the number thing.

What happens when quotas are imposed? When a quota is imposed, the amount of goods that a country can import are reduced. The businesses that produce the same type of good benefit in a country that imposes quotas.

Some questions: How does a producer of a certain type of good benefit if their country imposes quotas? Which is more effective in protecting a country’s business, a quota or a tariff? How? If quotas and tariffs can benefit businesses in a country, how can an embargo (which allows no goods to come in) actually hurt a country’s economy?