What are tariffs?

Tariffs are essentially taxes that governments impose on imported goods and services. The primary purpose of tariffs is to increase the cost of foreign products, making them less competitive compared to domestic products. By raising the price of imported goods, tariffs encourage consumers to purchase homegrown alternatives, thus supporting local industries and protecting jobs within the country.

In addition to this protective function, tariffs can also serve as a source of revenue for governments. They can influence trade balances by making imported goods more expensive, which may reduce deficits in trade when imports exceed exports. Understanding tariffs is crucial for grasping international trade dynamics and the economic policies of a nation.

The other options involve concepts that do not accurately describe tariffs. For instance, fees for exporting products refer to charges associated with sending goods out of a country, and they do not capture the essence of tariffs. Loans for international trade fall under financial assistance or credit for trading activities, while incentives for domestic companies typically include subsidies or tax breaks rather than taking the form of a tariff.