A tariff is a tax on goods traded between two countries. A trade war is when two countries who trade goods with each other compete by alternately lowering prices on the products they sell until the other country can no longer afford to lower its prices.

It is a race to the bottom by both countries. Nobody wins a trade war. A tariff, on the other hand, may or may not be successful, depending on why it was levied. Let's talk about tariffs today.

Tariffs are used for several different purposes. For example, a country might use tariffs to protect jobs for its workers, to protect its developing industries, to offset unfair trade practices, to prevent dependence on foreign products, or to force another country to comply with the wishes of the country that imposes the tariff.

This is the way tariffs work. Suppose two countries manufacture and sell airplanes to each other. If the plane manufactured by France is superior in quality and price, it will soon capture the market, and the workers in India will be out of a job. In order to save jobs for its workers, India could impose a tax on each airplane manufactured in France, but sold in India in order to encourage buyers to buy airplanes manufactured in India, because they are cheaper.

Or, suppose France manufactures an old, established brand of automobile. Spain wants to start manufacturing a car of its own, but it takes a lot of money to design and build a new kind of auto, prove its viability, and establish a market for the new automobile. Spain could impose a tax on French automobiles to make them more expensive, while Spanish manufacturers are getting established and are able to being a competitive car to the market.

Or, suppose two countries both grow apples of equal quality. In order to gain a larger share of the market and sell more apples, thus bringing more money into the country, Spain pays its growers 50 cents a bushel for each bushel of apples they grow. This enables growers in Spain to sell their apples 50 cents cheaper than German growers. Germany could then impose a 50-cent tariff on all Spanish apples sold in Germany, thus equalizing prices.

Or, suppose Canada invents a new type of machine and sells one to Peru. Peru reverse engineers the machine, finds out how it is made, and starts manufacturing the machine itself. Canada then tells Peru to stop doing that. Peru refuses and continues making the machine. Canada then levies a tariff on the goods they buy from Peru to force Peru to stop manufacturing and selling the machine information they stole from Canada.

The trouble is, tariffs are a two-edged sword, which hurts both sides. Russia imposes a 10-cent-per-loaf tariff on bread it buys from China. China pays the tariff to the government of Russia and adds 10 cents to the price of the bread it sells to the citizens of Russia. The citizens of Russia then pay 10 cents more to China for each loaf of bread they buy. Thus, the tariff Russia imposed on China winds up being a tax on Russia's own citizens. Besides that, if China retaliates by refusing to buy eggs from Russia, it kills the egg industry in Russia as well.

Fred Gibson, of Tahlequah, is a retired educator with an ongoing interest in U.S. and world politics.

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