Protective Tariffs

Definition

Protective tariffs are taxes imposed on imported goods to raise their prices, making domestic products more competitive in the market. By increasing the cost of foreign goods, these tariffs aim to encourage consumers to buy locally produced items, thereby fostering industrial growth and protecting local jobs. This economic policy has played a significant role in various historical contexts, particularly during periods of industrialization and economic recovery.

5 Must Know Facts For Your Next Test

1. Protective tariffs were significant in the late 19th century as countries sought to boost their own industrial sectors amidst rising global competition.
2. In Canada, protective tariffs helped to foster local manufacturing during the early 20th century, supporting the growth of various industries such as textiles and machinery.
3. During the Great Depression, many countries raised protective tariffs in an attempt to shield their economies from foreign competition, leading to a decline in international trade.
4. The National Policy, introduced by Prime Minister John A. Macdonald in 1879, included protective tariffs as a cornerstone strategy for promoting Canadian industry and building a transcontinental railway.
5. While protective tariffs can protect local industries, they may also lead to retaliation from other countries, which can escalate into trade wars.

Review Questions

• How did protective tariffs influence the growth of Canadian industries during periods of industrialization?
  • Protective tariffs were crucial for the growth of Canadian industries by making imported goods more expensive and less appealing to consumers. This allowed local manufacturers to compete more effectively in the market, resulting in increased production and job creation within Canada. As a result, industries such as textiles and machinery flourished under these policies, fostering an environment conducive to industrial growth and economic development.
• Evaluate the impact of protective tariffs during the post-World War II economic recovery in Canada.
  • In the post-World War II era, protective tariffs played a significant role in Canada's economic recovery by shielding domestic industries from foreign competition. As Canada sought to rebuild its economy, these tariffs helped stimulate local production and job growth, allowing industries to expand. However, this protectionist approach also led to tensions with trading partners and raised concerns about the long-term sustainability of relying heavily on tariff protections instead of embracing free trade.
• Analyze the long-term effects of protective tariffs on international trade relations and economic policies globally.
  • The long-term effects of protective tariffs on international trade relations have been complex and often contentious. While they may provide short-term benefits for domestic industries by reducing competition from imports, they can also lead to retaliation from other nations, resulting in trade wars that hinder global commerce. Over time, many countries have shifted towards free trade agreements to facilitate smoother economic interactions. This shift has influenced global economic policies by promoting collaboration over protectionism, aiming for a balance between supporting local industries and engaging in international markets.

Related terms

Free Trade: An economic policy that allows goods and services to be traded across borders without tariffs or other trade barriers.

Import Substitution Industrialization (ISI): An economic development strategy that focuses on replacing foreign imports with domestic production to foster local industries.

Subsidies: Financial assistance provided by the government to support specific industries or sectors, often aimed at making domestic goods cheaper than imported products.