Looking for the answer to the question below related to Tariffs ?
Which trade policy results in the government levying both a specific tariff and an ad-valorem tariff on imported goods:
Options:
| a. Compound tariff b. Nominal tariff c. Effective tariff d. Revenue tariff |
The Correct Answer Is:
- a. Compound tariff
Answer Explanation:
Compound tariff results in the government levying both a specific tariff and an ad-valorem tariff on imported goods. When the United States and China negotiate a trade agreement, one of the key areas to be agreed upon is the level of tariffs that will be levied on imported goods. Tariffs are a form of taxation that is assessed on the importation of goods into a country. In order to understand how tariffs work, it is important to first understand what makes up a tariff. A specific tariff imposes a tax on a particular product, while an ad-valorem tariff assesses a tax based on the value of the product being imported.
When two countries negotiate an agreement, each side often wants to get as much as it can in terms of benefits for its citizens, which means that tariffs will often play an important role in these negotiations. For example, the United States wants to protect American manufacturing interests and China wants to increase domestic demand and reduce reliance on exports.