Tariff: America has imposed 50 percent tariff on the import of Indian goods. Recently, Mexico also announced to impose 50 percent tariff on the export of Indian products to the country. Ever since President Donald Trump was elected President of America for the second time, the word tariff has started being used more. Trump has imposed tariffs on India, Brazil and even the European Union. Now the question arises that what is this tariff after all?
What is tariff?
Tariff is a type of tax, which the government imposes on goods and services coming from foreign countries. For example, if a company in our country brings shoes made in a foreign company, then it will have to pay tariff to the government, due to which the shoes will become more expensive in the local market. Trump is not the first person to impose tariffs on imports from various countries, rather tariffs have been in place for centuries. It has been used to promote local trade and generate revenue.
Tariff is a border fee or tax, which the government imposes on goods imported from other countries. Companies importing goods have to pay this tax at the border. It is the same with service providers also. Obviously, if the expenditure on imports will be high, then things will automatically become expensive in the local market. There are two types of tariffs:-
Specific Tariff- A fixed price per unit imported, such as $500 for each automobile.
Ad-Valorem Tariff- A portion of the price of the item, such as 5 percent of the price of an item.
Why does the government impose tariffs?
Tariffs are a way for the government to generate revenue. Another advantage of this is that it enables local companies to compete with foreign companies. We can understand this with an example – suppose Chinese companies are manufacturing mobile phones and exporting them on a large scale to sell in America. In order to make profit, if the company will sell its smartphone with new technology at a cheaper rate, then obviously people will buy it more.
This will cause loss to American companies and the government’s revenue will also reduce. To deal with this, the government takes the help of tariffs so that domestic companies can be saved and the revenue also does not reduce. With the imposition of tariff, Chinese phones will become expensive in the American markets. Due to this, people will go back to local companies, which will give a boost to the companies there.
India is among the countries that impose highest tariffs
Generally, all countries impose tariffs, the only difference is the rate. However, India is one of the countries that imposes the highest tariffs compared to other countries. After Trump became President again, India removed 150 percent, 125 percent and 100 percent tariff rates. Earlier India used to impose 125 percent tariff on the import of luxury cars, which has now been reduced to 70 percent and now this is the highest rate of tariff in India. In the year 2025, the tariff rates in India have reduced by an average of 10.65 percent.
Also read:
Today, those who invested Rs 1 lakh are playing in crores, penny stock becomes multibagger; Know which is this stock giving amazing returns?
