What is a tariff?

A tariff is defined as a tax imposed by a government on imported goods. This mechanism is typically used to regulate international trade by increasing the cost of foreign products, thus making domestic goods more competitive. Tariffs can serve multiple purposes, such as generating revenue for the government and protecting local industries from foreign competition by making imported goods more expensive for consumers.

The role of tariffs is critical in shaping trade policies and can influence economic relationships between countries. By imposing tariffs, governments can attempt to protect their local economies and promote domestic production. This is particularly relevant in discussions about trade protectionism versus free trade.

The other options refer to different concepts within international trade: financial support to exporters is known as a subsidy, trade agreements are formal accords between countries to facilitate trade, and limits on the quantity of goods that can be traded are referred to as quotas. Each of these plays a role in the broader landscape of international trade but differs significantly from the definition of a tariff.