33.2 Methods of Protection LO 3, 4
A tariff raises the domestic price of the imported product and leads to
a reduction in the level of imports. Domestic consumers lose and
domestic producers gain. The overall effect of a tariff is a deadweight
loss for the importing country.
An import quota restricts the amount of imports and thus drives up
the domestic price of the good. Domestic consumers lose and
domestic producers gain. The overall effect is a larger deadweight loss
than with a tariff because, rather than the importing country
collecting tariff revenue, foreign producers benefit from a higher
price.
Antidumping and countervailing duties, although providing
legitimate restraints on unfair trading practices, are often used as
serious barriers to trade.