How do taxes on imports and exports work?

Taxes on imports and exports are known as tariffs or duties. They are used by governments as a way to regulate trade and protect their domestic industries.

When a country imposes a tax on an imported good, it is called an import tax or tariff. Similarly, when a country imposes a tax on an exported good, it is called an export tax or tariff.

The amount of tax that is imposed on imports and exports varies depending on the country and the type of goods being traded. Tariffs can be specific, meaning a fixed amount of tax is applied per unit of the imported/exported good, or they can be ad valorem, meaning a percentage of the value of the imported/exported good is taxed.

The primary purpose of tariffs is to protect domestic industries from foreign competition by making imported goods more expensive than locally produced goods. However, tariffs can also be used as a source of revenue for governments, as they collect taxes on imported goods.

Some countries may use tariffs as a political tool to achieve specific policy goals, such as encouraging the use of renewable energy or penalizing countries that violate human rights.