Tariffs have been a key instrument in government trade policies for centuries. For instance, one of the wealthiest ancient countries, Khazaria (7th-10th centuries CE), did not tax its citizens directly but instead imposed tariffs on all passing caravans due to its strategic location along major trade routes. In the United States, before introducing the federal income tax (1913), the government generated revenue primarily through tariffs. The role of tariffs is widely debated today, especially during election periods.

What Are Tariffs?

A tariff is, in essence, a tax imposed by a government on goods and services imported from other countries. The main purpose of tariffs is to make imported goods more expensive, thereby protecting domestic industries from foreign competition, to raise government revenue, and/or to influence trade policies. Tariffs can be broken down into two main types:

Specific tariffs: a fixed fee imposed per unit of imported goods (e.g., $100 per ton of imported steel)

Ad valorem tariffs: a percentage of the value of the imported goods (e.g., 10 percent on imported electronics).

Historically, tariffs were one of the primary sources of revenue for governments. Today, although their revenue-generating role has diminished, they are still used to protect domestic industries, control trade balances, and as leverage in international negotiations.