Which protectionist method imposes a levy on foreign imports to give domestic producers a relative price advantage?

Which protectionist method imposes a levy on foreign imports to give domestic producers a relative price advantage?

• A. Subsidies
• B. Tariffs
• C. Quotas
• D. Free trade

Answer: (B)

Tariffs are taxes placed on imported goods. By adding a levy to foreign products, their price rises relative to domestically produced goods, making local options cheaper for consumers and giving domestic producers a price advantage. This protective effect is the core reason tariffs are used to shield local industries from cheaper imports. Subsidies involve payments to domestic producers, not taxes on imports. Quotas restrict the quantity that can be imported, rather than adjusting price directly. Free trade means no protectionist measures are used at all.

Tariffs are taxes placed on imported goods. By adding a levy to foreign products, their price rises relative to domestically produced goods, making local options cheaper for consumers and giving domestic producers a price advantage. This protective effect is the core reason tariffs are used to shield local industries from cheaper imports.

Subsidies involve payments to domestic producers, not taxes on imports. Quotas restrict the quantity that can be imported, rather than adjusting price directly. Free trade means no protectionist measures are used at all.