Tariffs always cause a net welfare loss :: Economics

Tariffs unceasingly cause a net wellbeing lossExplain and critically prize this statement.In this essay, I go forth be discussing the impact of protectionism, infocus, the impact of tariffs, import duties. As tumefy discussing theoverall effect on welfare from the tariff, the gainers and the loserswill need to be identified. I will illustrate this diagrammatically. Iwill then move to discuss the value of the optimal tariff imposition.As well as discussing the first best argument, I will also look at thevalue of second best arguments, examining whether or not tariffs doalways cause a net welfare loss.A tariff requires the importer to pay a given fraction of the worldprice to the government. This protects domestic producers by fosteringthe world price well above the domestic price this of course has adownside for the consumers. A tariff works like a tax from theconsumers spot there are transfers from the consumers to boththe government in the form of revenue and to the producers in the formof higher profits. This can be illustrated effectively by look atFigure A, it shows the demand and supply curves for the home economy,Pa is the point where there is no concern, where supply meets demand. Pwis the world price for the commodity, the point of free trade and Pw +t is the price plus the tariff. We can see that during free trade, atPw the home economy should import (Qf - Cf) but when a tariff isimplemented this mean they will import (Qt - Ct). As we can see fromFigure A, the government will gain the revenue from the tariff, areaB. The price rise in imports content that there is a reduced demand forthem and increased demand for domestic producers. This results in again for the producer, area E. The loss for the consumer, area C, thisis where consumption is geld when Cf moves to Ct. Area A, is also aloss area, as when production increases from Qf to Qt production isinefficient, over the world price so this area is the extra bell thatthe economy pay for pro ducing the good at home. We can summarize thesegains and losses we can see that there is indeed a net loss forwelfare B - (E+A+B+C) + E = - (A-C).So are there any valid justifications for the imposition of tariffs.The strongest argument (some would say the only) in favour of a tariffcomes with the recognition that a domestic economy imports such asignificant supply of the world market for a commodity that an