What is a tariff?

A tariff is fundamentally defined as a tax imposed on imported goods. The primary purpose of tariffs is to increase the cost of foreign products, thereby making domestic products more competitively priced in comparison. This practice is commonly used by governments to protect local industries from foreign competition, encourage local consumption, and generate revenue for the state.

In this context, tariffs can have significant economic implications, affecting trade balances, domestic employment, and overall economic policy. When a tariff is enacted, it can lead to higher prices for consumers on imported goods, while providing an advantage to domestic producers who do not face the same added costs.

The other options refer to different economic mechanisms unrelated to the direct taxation of imports. For instance, subsidies are financial supports provided to domestic industries to lower their production costs, while export licenses regulate the shipment of goods overseas, and price controls relate to government regulations on the prices of domestic products. Understanding these distinctions is key for comprehending the broader implications of trade policies and their effects on the economy.