Tariffs and Non-tariffs in the US - Essay Example

Import tax protects several domestic industries in the importing country. Protection is achieved by raising the price of imported products so that they cost the same as those produced domestically.

The government computes the tariffs in two main ways. The Ad Valorem, which means “On value,” involves tax that is levied as a fixed percentage of the value of the imported commodity. Currently, the U.S collects 2.5% on imported automobiles. Therefore, if the country imports $100,000 Hyundai automobiles, then the government collects $2,500 in tax (Suranovic 2012). Specific tariffs involve levying a fixed amount of tax on each unit of the imported product sold without regard to the selling price. In some cases, the tariffs imposed may be a combination of the specific and Ad Valorem (Webb 2011). For example, a specific tariff of $0.51% is levied on imported wristwatches in the U.S coupled with a $6.25% ad valorem tariff on the case and the strap. A 5.3% ad valorem tariff is also imposed on the battery (Suranovic 2012). The tariffs levied on imports vary depending on the commodities, for example, goods from a country with the status of “most-favored” nation may incur a different tariff compared to products from other trading partners.

Non-tariff barriers include rules and regulations geared to keeping foreign goods out of the domestic market. They include specific limitations on trade, such as quotas. Quota refers to limiting an amount of import, for example, the U.S allows 1 million tons of sugar to be imported and not more than that (Bairstow 2011). The second barrier involves customs and administrative procedures such as anti-dumping practices and valuation systems. The implementation of standards, that is, packaging, labeling, and other standard disparities are other barriers to trade that are incorporated in the U.S (Bairstow 2011). The government’s participation in trade through export subsidies, procurement policies, countervailing duties, and domestic assistance programs are also effective non-trade barriers that are utilized in the country.

Voluntary Export Restraints (VERS) is another non-tariff barrier that is imposed in the country. This regulation is a government-imposed limit on the quantity of a specific product that can be exported to a specific country at a certain time. This restriction can be used to deter an importing country from adopting stringent trade barriers. VERS can also be used to offer protection to its industries that face competition from imported goods. For example, in the 1980s, Japan imposed quotas on itself for Japanese cars sold to the U.S. Resultantly the U.S threatened to impose trade barriers and went ahead to incorporate VERS so as to protect its market. The use of VERS resulted in a series of consequences including Honda; Nissan and Toyota Company began to produce cars in the U.S so as to circumvent the trade barrier (Szulczyk 2014).