Question

outline in bullet form the effects of tariffs quotas and embargoes on the three major segments of our economy:

Answer 1

1.

Consumers are worse-off: A heavy duty on imported goods such as tariff increases the prices of domestically produced goods and services. Consumer has to pay more for purchasing the same quantity. So, trade barriers like import quota, embargo, tariffs make the domestic consumers worse-off. As foreign goods are strictly prohibited, the domestic consumers face limited variety of goods and services and has to accept inferior quality product.

2.

Initializing Global Trade War: Imposing a tariff on a foreign good is not welcome by the foreign countries. These foreign countries start retaliating against each other and a situation of trade war occurs where, in the extreme case, trade will get prohibited completely (embargo) and kills the competition.

3.

Reduced Economic Efficiency

Trade barriers are detrimental to economic growth. They impose a very high cost on society which is also known as Deadweight loss. This loss is a sunk cost for the economy and cannot be recovered later. The concept of comparative advantage also suggest that these trade barriers lead to economic inefficiency.