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All countries have tariff rates and these rates are nothing but customs and excise taxes on the goods that help the country to earn more revenue.
Tariff rates have the following advantages for a country:
- The country can earn foreign exchange
- Local industry is protected by foreign competitive businesses
- Less imported goods are bought by consumers so they resort to buying local products
- The currency remains in the country so the government earns revenue
On one hand tariff rates a good because a domestic business is protect from competing foreign businesses who might be able to offer consumers lower prices in comparison. However, on the other hand small businesses in a country who import raw material are exposed to the risk of high tariff rates, which could be detrimental for these businesses.
In the US, tariff rates are collected at the point of entry by the US Customs and Excise Department. Ultimately, it is the tariff rates that determine at what price an imported product or good is sold in the US market. The higher the tariff, the more expensive would the product be. However, this is necessary to give an edge to domestic industry who offer the same goods or products. No nation would want its local industry to suffer as it would have drastic effect on the economy.
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