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Export tariffs are taxes on goods exported from a country, used to create economic barriers to trade. They raise prices and limit production and sales. Governments use them to slow inflation or protect domestic supplies. Protectionism goes against free trade principles, but can preserve jobs and vital industries. Import tariffs are preferred, and export tariffs are rarely used.
An export tariff is a tax levied on a good exported from a country. Governments use tariffs to create economic barriers to trade. Tariffs raise the overall prices of goods, limiting their production and sale. An export tariff specifically increases the cost of selling domestic goods abroad. Because they are believed to hurt domestic trade, export duties tend to be quite unpopular.
A government economist would most likely use an export tariff if the country faces widespread inflation. In some cases, export tariffs are used to ensure that a country keeps enough of an important good. For example, in the past, China has imposed export duties on many major grain products. High international grain prices have caused many producers of these grain products to export their wares. This caused a domestic shortage of grain products, so the government imposed an export tariff to stabilize domestic demand.
An export tariff is a method of protectionism, an economic policy in which a government restricts trade to protect its industries and people. Typically, governments prefer to use import tariffs as a method of economic protection, as they raise the price for foreign companies to import their goods. Export tariffs, on the other hand, raise the price for domestic companies to export their goods. Most see export tariffs as harmful to the national economy. In countries with floating exchange rates, however, both types of tariffs have the same effect.
The idea of protectionism goes against the principles of free trade. Many economists argue that this is a bad thing, as free trade tends to create far more jobs than it destroys. Protectionism, however, ensures that many household chores are preserved in the short term. It also ensures that industries vital to military and infrastructure use are able to stay in business. In a free-trade global economy, economists say, tariffs would not be necessary as nations would be able to specialize in specific sectors and would not need to protect other sectors.
While export tariffs can be powerful tools, they are rarely used. An export tariff can be used most effectively to slow or stop inflation or to protect domestic supplies of goods. However, many people are against the use of export tariffs because it increases the cost of doing business for domestic companies. Because they are rarely used, they usually receive little or no attention in introductory economics lessons. Even advanced economics courses tend to spend little time on the subject of the export tariff.
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