Explain the effects of increased Tariffs on goods from the UK

There are many effects of tariffs. In an A- level exam a student would be expected to make a several points, with several chains of reasoning, with an evaluation, ending with a conclusion. An Example of one of these points may be:One possible effect of increasing tariffs is an increased level of unemployment in the UK. A tariff is a tax places on goods crossing borders. If another country increases its tariffs on UK goods, firms will increase the price of the good to make up for the increased cost. This makes goods coming from the UK less price competitive as they appear relatively more expensive, compared to domestic goods. This will result in less goods being bought from the UK in the country imposing the tariffs, as an increase in price will result in a decrease in demand through pricing mechanisms. A decrease in demand for UK goods may mean that firms make less revenue. This will lead to unemployment as, to reduce costs, firms will lay workers off. However, the effects of this may be dependent on the exchange rate. If the value of the pound is less than that of the country that has imposed the tariffs on UK goods, the tariff will have less impact as goods from the UK may still remain relatively cheaper, meaning demand will stay consistent, not leading to unemployment in the UK.

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Answered by Tom C. Economics tutor

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