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Had to stop there. Say what? Please tell me how a tariff is a subsidy? Sure they are both measures used by governments to help domestic companies…but they go about it in a
completely different way.
A
tariff is a tax on imported goods which drives the price up on the imported product which helps the domestic companies with the higher priced products stay competitive...and
the government generates revenue in the process.
A
subsidy is a handout. Nothing more…nothing less. It is just the government giving tax payer money to the domestic companies to offset the lack of revenue/profit that they are losing because imports are cheaper for consumers…and this helps them stay competitive in the short term…and sometimes basically keeps them from going out of business.
They can be effective in that regard and they can stimulate the domestic economy in the short term, but they generate no revenue for the government in the process. In fact they do the exact opposite…because the government is losing money because it is an
expense for the government…they are just handing out tax payer money to the domestic companies.
(Given…there are usually stipulations to this handout…but it is still an expense for the government). That's why governments usually choose to go the tariff route.
The downside to tariffs is that it usually drives down consumer consumption because the prices on the products themselves are higher overall…the domestic product price is higher already and the import price is higher because of the tariff added to their price. A subsidy usually keeps consumer consumption higher because there is no added price to the product itself. So, while tariffs do succeed in leveling the playing field for domestic companies…it doesn't always have the desired effect of stimulating the domestic economy…it could in fact have the opposite effect.
Now, we can argue till the cows come home on which one is a better tactic for the feds to use…or if they should use neither and just stay out of the way. But please stop saying that "
a tariff IS a subsidy". That's moronic.
Learn Economics 101.