The United States closely regulates the type and quantity of products coming in and out of its borders. You cannot, for example, buy enriched uranium or opium. In some cases, you may not be able to produce an item using materials from one country. The United States imposes several limitations on trade, depending on its objectives.
Tariff
A tariff is a type of tax on goods that enter a country.Nations establish tariffs depending on their economic goals. When a country tries to influence another nation to pollute less, an eco-tariff might be levied against the country's exports. If the nation wants to curtail the import of a good altogether, the government issues a prohibitive tariff, one so high that no business wishes to import it. New York University finance professor Richard Levich explains that tariffs reduce consumer surplus because of higher prices, increases producer surplus because of the higher cost they can charge to consumers and increases government revenue because of the tax collected from the tariff.
Embargo
Another trade barrier is an embargo. An embargo is the complete restriction of a particular good or service. Cuban cigars cannot be legally imported into the U.S. because of trade sanctions against Cuba. In this case, the embargo is to protest Cuba's political actions. The U.S. places embargoes on potentially dangerous items, such as nuclear weaponry, and products that harm the environment, such as ivory tusks and endangered animals.
Import Quotas and Licenses
When the government wants to regulate the amount of certain foreign goods entering its borders, it imposes an import quota. Limitations on the quantity of goods brought into the country are often imposed by issuing licenses. Only businesses holding a license may import certain goods. Import licenses specify what a person can import and in what quantity. Examples of items requiring this type of license include tobacco, firearms and tobacco. The government has the opportunity to earn revenue if it charges for these licenses, though this rarely happens. Harvard Professor Gregory Mankiw explains how Japanese auto firms profit from the United States asking Japan to limit exports of its vehicles: the Japanese government issues the licenses to firms and consequently, the foreign country profits from the surplus.
Subsidies
Subsidies are an indirect barrier to trade: A subsidy is government financial support of an industry. For instance, the United States subsidizes the production of soy and corn. This assistance allows farmers to sell these commodities at a cost lower than the true market value. Consequently, foreign agriculture companies cannot compete with the artificially low price offered by U.S. firms.
