An International Economics Class: How Can Tariffs Be Justified

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How Can Tariffs Be Justified
Introduction
The word tariff is quite common and the most universal meaning is tax on imported goods. The Merriam-Webster Online Dictionary offers a more comprehensive definition noting that it is a “schedule of duties imposed by a government on imported or in some countries exported goods.” Immediately the products cross the boundaries of the importing nation, they are subject to the tariff rates of that nation. One cannot mention tariffs without mentioning international trade. There can never be tariffs without international trade and countries continue to enhance each other’s strength through trade. However, there are those opposed to international trade and increase the tariffs on imported goods while others increase the tariffs on exported goods. As seen in the trade war between China and the U.S., when tariff wars ensue, the people who suffer the most are the employees who must face the wrath of budget cuts that organizations impose. An article by kif Leswing from CNBC reported that by the end of August 2019, the trade war had already “cost electronics companies $10 billion.” For American households, Bui and Russell from the New York Times report that “across the spectrum, the tariffs may cost up to $970 for America’s wealthiest households and as low as $340 for its poorest.” The above statements mimic a situation when tariffs are used in the wrong way. But what happens when they are imposed not for purposes of trade wars but because they are considered crucial? Well, this article seeks to showcase instances when tariffs are justified or when governments are within their right to impose tariffs on imports.
Tariffs are a source of government revenue and this is one way to justify tariffs. However, for most governments, tariffs are not the main source of revenue. For example, Bown and Irwin from the Washington Post report that “the United States gets 98 percent of government revenue from non-tariff sources.” This means that tariffs only help generate a measly 2 percent of the government revenue as indicated in the image shown below (Fig 1). In the U.S., a significant percentage of the government revenue comes from “individual and corporate income taxes (57 percent) and social insurance and retirement receipts.” However, it would be wrong to entirely ignore the amount of revenue raised through tariffs. Kopf (np) offers a preview of the revenue collected through tariffs. He notes that in the first quarter of 2019, the government has managed to generate 3.6 percent of all government revenue. While the bigger percentage of this is as a result of the trade war between the U.S. and China, it helps to justify the case for tariffs. Below is an image with a summary of revenue from tariffs from several decades back (Fig 2).
Fig 1
Fig 2
Tariffs can also be justified on the grounds that they also help to protect the employment and wages of the importing nation. The sole responsibility of the central or federal government is to help make sure its citizens are protected. Protection in this context means physical as well as provision of environments that help to enhance the wellbeing of the natives. So, a government is within its rights and is acting in accordance with the interest of its people when it imposes tariffs to help ensure that their employment is safeguarded. A government can also impose tariffs to help create an environment that boosts employment opportunities for its citizens. International trade can be overwhelming for the domestic economy. Often, it makes sense to put a cap or impose tariffs and manage imports to help strengthen the domestic industries. When consumers consume more of the imports than domestic products, the local or domestic economy is disadvantaged. Local organizations will struggle and this will, in turn, affect negatively impact employment rates. So, in some instances, governments can impose tariffs to help protect their public.
Another justification for tariffs is national defense. This particular point considers products that are critical or crucial for the national defense of an importing country. There are those products that a country can consider crucial to its national defense. For such products, a country is within its rights to impose tariffs on international competition to help protect the industries involved in the prod...