What is a 'tariff' in the context of international trade?

In the context of international trade, a 'tariff' refers to a tax imposed on goods and services entering a country. This tax is levied by the government of the importing country and is intended to increase the cost of imported goods, thereby encouraging consumers to buy domestically produced items. Tariffs can serve various purposes, such as protecting local industries, generating revenue for the government, and responding to unfair trade practices from other countries.

Understanding tariffs is essential for businesses engaged in international trade because they can significantly impact pricing, supply chain decisions, and overall market strategy. By increasing the cost of imported goods, tariffs can create a competitive advantage for local producers. Therefore, recognizing the role that tariffs play in international trade is crucial for anyone studying ethical procurement and supply management.