Punitive tariffs are intended to ensure fair competition and fairer wages. But they are not just levies imposed on the import of certain goods — they also have a political use.
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00:00What are punitive tariffs?
00:03Punitive tariffs are fees a country can levy on the import of certain goods.
00:09They are a way to protect a domestic industry or economy from global competition.
00:14And they are sometimes used when trade relations with other countries become strained.
00:19For example, if wages are lower in country A than in country B,
00:24the products manufactured in country A are generally cheaper.
00:28Raising a tariff on imported goods from country A
00:31would make their goods more expensive and level the playing field.
00:35Consumers in country B may then be more likely to buy from local producers.
00:40Punitive tariffs can also be used to fight against dumping,
00:44for example, selling at an artificially low cost.
00:48If a branch of industry receives government subsidies,
00:51its products gain a competitive advantage on the market over those that do not.
00:57Punitive tariffs are intended to protect domestic industry in countries where there are no such subsidies.
01:03They can also serve as political leverage.
01:06But if tensions between countries escalate, a trade war can occur.
01:11A customs union, such as the European Union, protects its members from such problems.
01:16Free trade agreements also enable the import and export of goods without surcharges.
01:22This can also boost the domestic economy.