In the context of international trade, what is a tariff?

A tariff is defined as a tax imposed on imported goods and services. This form of taxation is typically used by governments to regulate foreign trade and protect domestic industries from foreign competition. By increasing the cost of imported goods, tariffs can encourage consumers to purchase domestically produced items instead, thus supporting local businesses and jobs.

When a tariff is applied, it raises the price of foreign products, which can lead to a decrease in the quantity of imports and an increase in the availability and demand for similar products made within the country. The revenue generated from tariffs can also be used by the government for various public services or initiatives.

Understanding the role of tariffs in international trade is essential, as they are significant tools in trade policy. They can influence international relations and economic interactions between countries, which is a vital part of global economic dynamics. The other options such as restrictions on trade, subsidies for exporters, or agreements between countries do not accurately capture the specific function and definition of a tariff in this context.