Why can customs unions lead to higher prices for consumers?

Although trading blocs such as the EU (which is a customs union) promote free trade without tariffs (taxes on imports) within the borders of the union, it still places tariffs on imports that are external to the trading bloc. This means that the act of being in a customs union leads to trade diversion which means consumers in a country like the UK will tend to import more from countries inside the EU, even though the producers outside the bloc may actually charge lower prices but because of the tariffs imposed on them they become relatively more expensive.
Therefore, trading blocs can be seen as protectionist in nature to external countries that in relation to some products leads to higher prices for consumers.

AF
Answered by Angus F. Economics tutor

1842 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

If John’s elasticity of demand for burgers is constantly 0.9, and he buys 4 burgers when the price is £1.50 per burger, how many will he buy when the price is £1.00 per burger


Explain the differences between short run and long run growth


What are economies of scale and scope?


What measures could the government take to boost aggregate demand?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning