Types Of Teriffs

Tariffs come in several types, each serving different economic and policy purposes. The Ad Valorem Tariff is calculated as a percentage of the value of the imported good—for example, a 10% tariff on a $20,000 car results in a $2,000 tax. The Specific Tariff charges a fixed amount per unit, such as $5 per imported smartphone, regardless of its price. A Compound Tariff combines both of these methods, applying a percentage of the item's value plus a fixed amount per unit—for instance, 5% of the value plus $3 per item. Then there’s the Sliding Scale Tariff, also known as a Variable Tariff, which adjusts based on market prices; for example, if international wheat prices fall too low, the tariff increases to protect local farmers. A Tariff-Rate Quota (TRQ) allows a set amount of goods to be imported at a lower tariff rate, and once that limit is exceeded, a higher tariff kicks in—this system is common for agricultural products like sugar or rice. A Revenue Tariff is designed primarily to raise money for the government rather than protect industries, often applied to luxury or non-essential items that aren't produced domestically. In contrast, a Protective Tariff is meant to guard domestic industries from foreign competition by making imported goods more expensive, encouraging consumers to buy local. Each type of tariff plays a unique role in shaping trade policy, regulating market competition, and balancing national economic goals.