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ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business

Country A has a 20% tariff on imported steel. A domestic steel producer in Country A is most likely to benefit from the tariff because:

The domestic producer benefits because the tariff makes imported steel more expensive, so locally produced steel becomes relatively cheaper and more competitive. Buyers generally face higher prices, and the tariff revenue goes to the government rather than foreign producers.

  1. AImported steel becomes more expensive, making domestic steel relatively more price competitiveCorrect
  2. BDomestic steel buyers will face lower prices due to greater competition
  3. CForeign producers will receive higher prices for steel sold in Country A

Explanation

A tariff raises the price of imports in the domestic market, improving the relative competitiveness of local producers. Domestic buyers typically pay more, not less, and the tariff revenue goes to the government, so foreign producers do not gain higher prices.

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