Trade & Trade Barriers. How do tariffs, quotas, and embargos serve as barriers to trade?

Trade &

Trade Barriers

How do tariffs, quotas, and

embargos serve as barriers to

trade?

Tariffs • What are tariffs?

– Taxes on imports• What does it do?

– Raise the price of imported goods• Who does it benefit?

– Domestic suppliers …• increases demand from domestic suppliers AND • increases their prices!

• Who collects the money from tariffs?– Domestic government

Quotas • What are quotas?

– Puts a legal limit on the amount that can be imported!

• What does it do?– Creates shortages – which causes prices to increase

• Who does it benefit?– Domestic suppliers …

• increases demand from domestic suppliers AND • increases their prices!

• Is money collected from quotas?– No

Embargos • What are embargos?

– Prohibits trade with other nations

• What does it do?– Bar imports FROM a foreign nation OR– Bar exports TO other nations OR – Both!

• Who does it benefit?– NO ONE! – Normally embargos are imposed to hurt a nation’s

economy in a manner to force the nation to take a particular action

• Is money collected from embargos?– No!

Take 5 … • Interesting point … • The word “embargo” comes from a

derivative of “embargar” which means to hinder or embarrass

• Therefore … looking at the origins of this word, how do you think it relates to the meaning of the word?

Your chart should look like this … Trade barrier What is it? What does it

do?Who does it benefit?

Who collects the money?

Tariffs Tax on imports Raise the price of imported goods

Domestic suppliers•Increases their demand•Increases their prices

Domestic government

Quotas Limits the amount that can be imported

Creates shortages thus increases price

Domestic suppliers•Increases demand / prices

No money collected

Embargos Prohibits trade with other nations

Bars imports FROM other nations OR exports TO other nations

No one … usually meant to hurt nation’s economy to force them to take an action

No money collected

Your turn … • When would a nation

implement tariffs?• When would a nation

implement quotas?• When would a nation

implement embargos?

Free Trade Agreement

• What does free trade mean?• Who does the US have a free

trade agreement with?

The absence of trade barriers.

•Today, the United States has FTAs with 17 countries, such as Israel, Jordan, Canada, Oman, and

Singapore to name a few.•In 2006, six new FTAs were implemented: with Bahrain,

El Salvador, Guatemala, Honduras, Morocco, and Nicaragua.

What can we

determine about our

trading industry

based on this chart?

Balance in Trade • What do you think “balance in

trade” means?• Why do you think this is important

to a country?• What do you think would be the

disadvantages for countries who do not have a balance in trade?

Get your Quizdoms ready!!On your mark … get set …

GO!!!

What is a tax on imports called?

A)Embargos

B)Quotas

C)Tariffs

What is a limit on imports called?

A) Quotas

B) Tariffs

C) Embargos

What is it called when a country stops trading with another country in order to force a political change?

A) Tariffs

B) Quotas

C) Embargos

If a country’s government wanted to make some money on imports, which barrier would they implement?

A) Embargos

B) Tariffs

C) Quotas

In 1973, after the 2-day Yom Kippur War, Saudi Arabia used what trade barrier against the US in order to force the US to stop supporting Israel?

A) Embargo

B) Tarriff

C) Quota

On which country did the US impose an embargo in order to try to force the country to end apartheid?

A)Israel

B)Iran

C)Afghanistan

D)South Africa

Words to know … • Balance in trade• Tariffs• Embargos • Quotas • Free trade agreement

Trade BarriersTrade barrier What is it? What does it

do?Who does it benefit?

Who collects the money?

Tariffs ___on imports Raise the price of imported goods

____________suppliers•___________their demand•Increases their prices

____________government

Quotas _____the amount that can be imported

Creates shortages thus ____________price

Domestic suppliers•___________demand / prices

No money collected

Embargos Prohibits _______with other nations

Bars imports FROM other nations OR exports TO other nations

No one … usually meant to hurt nation’s economy to force them to take an action

No money collected

Trade BarriersTrade barrier What is it? What does it

do?Who does it benefit?

Who collects the money?

Tariffs

Quotas

Embargos