The evilness of damaging tariffs and their unintended consequences

Nicholas Biekpe ()
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Nicholas Biekpe: Chartered Institute of Development Finance

Development Finance Agenda, 2025, vol. 10, issue 2, 3

Abstract: Trade higher tariffs can hinder trade by introducing several economic distortions that affect both con- sumers and businesses. By, aggressively, protecting domestic industries with higher prices on foreign goods, tariffs can prevent the natural allocation of resources in line with the theory of comparative advantage, leading to inefficiencies in production. At the other end of the pendulum, David Ricardo's theory of comparative advantage has consistently shown that free trade allows countries to maximize their economic welfare through specialization and exchange. Tariffs, therefore, interfere with this pro- cess by disrupting price signals and resource alloca- tion, ultimately leading to less efficient outcomes and lower overall economic gains for all trading partners.

Date: 2025
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