Effects of Tariffs on International Trade
In the context of international trade, countries often engage in trade policies that can significantly affect their economic environment. One such policy is the imposition of tariffs on imported goods. Tariffs are primarily used to protect domestic industries by making imported goods more expensive relative to locally produced goods.
Consider the following three statements regarding the effects of tariffs on international trade:
Tariffs increase the prices of imported goods, leading to higher overall consumer prices in the domestic market.
Implementing tariffs will always lead to a gain in employment for all domestic industries.
Tariffs can result in retaliation from trading partners, potentially leading to trade wars.
Which statement is true regarding the effects of tariffs in international trade?