Barriers to Trade

There are many ways that countries try to create trade barriers to limit free trade and create barriers for exporting goods to their home market.  Exhibit 2.6 (Cateora, Gilly & Graham, 2009, p. 37) lists the different methods that companies use to limit imports and enhance their exports, trying to gain an advantage for their home country's market.

Tariffs

Tariffs are used by governments to try to lessen dependence on global producers of goods, thus restricting free trade.   For instance, the US has imposed tariffs on the importing of Japanese automobiles.  These tariffs, at the time, made the Japanese automobile more expensive than the competing American automobile due to the tariff.  The Japanese government responded by inducing tariffs on imported American cars in Japan.   Tariffs are utilized to help local manufacturers in a home country have an advantage in terms of cost compared to the foreign country's business, which imported the goods. 

Here is a hypothetical example of how a tariff would increase the cost to the consumer.

Company A exports DVD players to the United States.  The US in this hypothetical example is imposing a 10% tariff on all imported DVD players.  This causes the price of the DVD player to be artificially inflated to consumers by 10%.  A 0.00 DVD player + 10% tariff sells for 0.00.  However, company B produces DVD players here in the US and can sell the same type of DVD player cheaper due to not having to pay the tariff.  Consumers will most likely want to purchase the less expensive DVD player if all things are equal.