Consequences of Trade Restrictions and Tariffs

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Consequences of Trade Restrictions and Tariffs

How does imposing trade restrictions affect a country's macro economic objectives?

Nowadays all countries need to trade between themselves. Countries always lack of some type of good and the only way they can get them is by importing them from other countries which do produce the desired goods. However, countries many times import products they are able of producing and now, this isn´t a matter of need; it´s a matter of taste in order to give the consumers the possibility to choose.

Both imports and exports contribute, in different ways, to the development of a certain economy, for example the Peruvian one. Nowadays, Peru has an open economy which allows importing and exporting. When a country imports any product it can be because it doesn´t produce it or because it want´s to give greater variety to certain areas of the market. This last case should be like a stimuli for national producers to produce more and with a better quality and to find ways of having lower costs of production. This aims come to light because, as foreign products enter the market, they may be of a better quality and even cheaper than the national ones. Now, the consumers will have more possibilities to choose from and, it is very probbable that they will choose the cheaper and brand new products. So, if national producers don´t do anything in order to improve their

products, then they will be in danger of going to bankruptcy. As a result of this, the national products have to seek, as I said before, for cheaper costs and better products.

When this occurrs, then national products are ready (or at least have more possibilities) to compete in international markets. Supposedly, now they should have a better quality, they should be cheaper and so, they are ready to be exported. When products are sold at international markets, then this brings more money into the peruvian economy; as exports are like the salary of a country...
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