Theory question 108
International Trade(a) What is an embargo?
(b) Outline any three reasons for imposing tariffs on imports.
(c) Explain any three reasons against the use of tariffs.
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(a) An embargo is a total ban on trade (imports or exports) in a commodity or with a particular country.
(b) Any three: to raise government revenue; to protect infant industries; to reduce imports and correct balance of payments deficit; to prevent dumping; to discourage harmful goods; to create local employment; for retaliation.
(c) Any three: higher prices for consumers; protected firms may remain inefficient; other countries may retaliate; reduced choice and quality; encourages smuggling; reduces gains from specialisation and trade; may cause imported inflation for inputs.
Tariffs protect producers but cost consumers.