Tariff means 'tax' or 'duty'. Tariff barriers are the tax barriers or the monetary barriers imposed on internationally traded goods when they cross the national borders. (SlideShare, 6th September 2016)
Some tariff barriers include;
- tax
- import charges
- laws
- standards such as health and safety
- employment law
- packaging, label and product standards
- restrictive licenses
Countries usually impose tariffs in order to protect certain industries that are perceived as essential or which have strong political influence.
The purpose of a tariff, which is imposed by the government is used to raise the cost of a particular import, is to limit or reduce the amount of a specific good which is imported into the country. Making an import more expensive can improve the economics of producing that product domestically. (Jed Graham 29/8/19)
There are implications that come with having tariffs enforced as they have to be paid for. When President Trump imposed tariffs of 10% on $200 billion worth of Chinese imports in September 2018, Walmart and other retailers announced that the tariffs would either result in some combination of higher prices or lower profits. Walmart could pay $3 of the $6 cost and pass half of it on to customers, whose price would rise by $3. In that case, Walmart profit shrinks and customers are left with a thinner wallet.(Jed Graham 29/8/19)
Advantages of having trade barriers
One advantage to trade barriers is that it can encourage economic independence, this can aid a country in becoming more self-sufficient in terms of producing and using their own resources internally in their own country. Japan can be considered as being self-sufficient in terms of their resources and climate with the use of silk worms and cotton plants for clothing, for example. As well as this they use trees for buildings and fuel. In comparison to Canada, Japan has a longer growing season in terms of rainfall and temperature. (Google sites) However, Japan has many areas which are inhabitable which means they also cannot farm any products so more intensive farming is required in terms of the land in which can be farmed.
by keeping companies from "offshoring" or transferring domestic jobs abroad. These trade barriers
do help to preserve current employment, which can be seen as a key advantage. On the other hand, by limiting the competitive advantage of a country, they may also decrease opportunities for future employment. (eHow, 13th May 2017)
Disadvantages of having trade barriers
There are some disadvantages of having trade barriers, one being higher associated costs. As a manufacturer or distributor, you may need to pay more for the goods that are required to run your business. . For example, if you're selling electronics, importing laptops and cameras will be more expensive unless you stick to domestic brands. Therefore, you will need to raise the prices customers must pay. For instance, the proposed increased tariffs on Chinese imports in 2018 could result in higher prices next time you are in the market to buy your next smartphone, tablet or laptop. Due to increases like these, the National Taxpayers Foundation Union estimates that the annual cost of tariffs in the United States economy is $41.65 billion. (Legal Beagle, 15th December, 2018)
Trade barriers can restrict product offerings in certain countries as import costs are associated with a limited choice of products. Small businesses, for instance, might not be able to afford to pay these costs so that they will offer fewer goods. Despite this fact, import restrictiveness remains high in developing countries, especially East and South Asia. Many governments put trade restrictions in place to reserve the domestic industry and protect special interests. In the long run, this practice affects economic growth and reduces overall economic efficiency. (Legal Beagle, 15th December, 2018)
Free trade promotes competition amongst different countries which forces local companies to keep product prices at a lower level however trade barriers prevent this. They increase monopoly power and limit competition allowing producers to charge higher prices. Additionally, limiting the competition leads to inflation, causing a decline in customer spending power. It might also stifle innovation, since protectionism provides no incentive for a company to invest in technological advancement. Since there is less incentive to provide superior products, quality will decline over time. (Legal Beagle, 15th December 2018)
Barriers to trade in Japan
In Japan, tariffs are generally low, they have some non-tariff barriers that may impact upon commercial activity by impending or delaying the importation of foreign products into Japan.
Japan's tariff is on average one of the lowest in the world with approximately 2% for non-agricultural products. On the other hand a consumption tax of 8% was levied on a wide range of goods and services, however this was due to increase to 10% in October 2019. (HKTDC, 22nd June 2018)
With Japan and the EU's new agreement some long term and short term changes will be made in relation to tariffs and this diagram outlines the changes that will be happening. Obtained from: The Mainichi, July 2017.
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