Tarrifs and Trade Essay Example | Topics and Well Written Essays - 500 words

Tarrifs and Trade - Essay Example Thus, the overall effect of a tariff implemented by a small nation must reduce the national welfare (Nunn & Trefler, 2010). Thus, whenever a small country will implement the tariff, the national welfare is bound to fall, and the higher the tariff will be set, the more the loss will be experienced and consumers will lose as government recipients and producers spending gain. In a large country, consumers of the good suffer from the price increase, as the producers will experience a well-being increase from the tariff. Thus, the tariff net effect is composed of three major results that are a negative distortion in production, positive trade effect terms as well as a negative consumption distortion. Thus, there are both positive and negative elements as the effect can be either negative or positive. However, the overall result is that it can be positive implying that a tariff that is implemented by a large nation may increase the national welfare (Debaere & Mostashari, 2010). Unlike quotas, tariffs are important as they generate the government some revenue. The US according to statistics collects over 20 billion a year from revenue from tariff that could be lost with quotas (Motoshige Itoh & Yoshiyasu Ono, 1982). Another reason is that quotas may result in administrative corruption. Tariffs provide customs officials with authority and power providing access to favored organizations and denying the lesser-favored ones as opposed to import quotas. Moreover, import quotas have a high probability of causing smuggling especially when set at unreasonable values (Grant, Hertel, & Rutherford, 2009). A strong dollar is good while, on the other hand, weak is bad. As the generalization sounds simple, it is very different and confusing when it comes to the dollar. A strong dollar is very strong when compared to other foreign currency, and the vice-versa is