Why do high tariff levels restrict international trade?

• A. They encourage foreign producers to export more goods to the country imposing tariffs.
• B. They increase the cost of imported goods, making them less competitive compared to domestic products.
• C. They decrease the demand for domestic goods by making imports cheaper.
• D. They eliminate all non-tariff barriers to trade.

Answer: (B)

Verified step by step guidance

1. Understand what a tariff is: a tariff is a tax imposed by a country on imported goods, which raises the price of those goods when they enter the domestic market.
2. Recognize that when tariffs increase the cost of imported goods, these goods become more expensive for consumers compared to domestically produced goods.
3. Analyze how higher prices on imports reduce the quantity demanded for these foreign goods because consumers tend to buy less of the more expensive imported products.
4. Consider that as imported goods become less competitive due to higher prices, domestic producers face less competition and may increase their market share.
5. Conclude that high tariff levels restrict international trade by making imports more costly and less attractive, thereby reducing the volume of goods traded across borders.