2. Protectionism Policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other handicaps placed on imports. Wars and economic depressions historically have resulted in increases in protectionism, while peace and prosperity have tended to encourage free trade (laissez-faire).

3. TARIFFS: A DEFINITION DEFINITION: A tariff is a tax on imported products or services. In the case of tariffs imposed by the United States, the business that imports or produces the foreign product must pay the tax to the U.S. government. The tariff revenue goes directly to the U.S. Treasury. EXAMPLE: Suppose two different companies, Beebock and Bike, sell athletic shoes in the United States. Beebock is located in Brazil. Bike is located in Ortonville, Minnesota. A tariff must be paid on all shoes made outside the United States and sold in the United States. The tariff is 10 percent of all total sales revenues. Both companies sell 100,000 pairs of shoes per month at a price of $100 per pair. 1. Which company must pay the tariff? 2. How much will the tariff cost the company? 3. Who receives the revenues generated by the tariffs? 4. Does Bike benefit from this tariff? © National Council on Economic Education United States History: Focus on Economics, Lesson 7 Can Business Profit from Tariffs: Economics Lesson

4. Subsidies A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.

5. Quotas A government-imposed trade restriction that limits the number, or in certain cases the value, of goods and services that can be imported or exported during a particular time period. Quotas are used in international trade to help regulate the volume of trade between countries.

6. Embargo An official ban on trade or other commercial activity with a particular country.