<p>This is how I read your question: </p>

<pre><code>If a state places a tariff on a good,             &lt;- added a comma here
domestic manufacturers of that good become
more price-competitive in the domestic market
at the expense of overseas suppliers.

Could this be said to be a policy choice that subsidies that industry?
</code></pre>

<p>Assuming the country is a small and could not affect world price, then the answer is yes. To be more precise, an import tariff is equivalent to product-specific subsidy PLUS a consumption tax of that product.</p>

<p><strong>Subsidy + consumption tax:</strong> Domestic producers gain the subsidized amount for each unit sold. Buyers pay for that extra amount the producers gain.</p>

<p><strong>Tariff:</strong> The price of import goods (world price) rises, so domestic producers can sell at a higher price. The buyers are the ones who pay for that price difference.</p>

<p>"Credible" sources:</p>

<ul>
<li><a href="http://internationalecon.com/Trade/Tch95/T95-3.php" rel="nofollow noreferrer">http://internationalecon.com/Trade/Tch95/T95-3.php</a></li>
<li><a href="https://www.cairn.info/revue-reflets-et-perspectives-de-la-vie-economique-2004-1-page-25.htm" rel="nofollow noreferrer">https://www.cairn.info/revue-reflets-et-perspectives-de-la-vie-economique-2004-1-page-25.htm</a>, Section 4</li>
</ul>

CC BY-SA 4.0
2019-06-20T03:15:11.013Z
How does this change if the tariff affects world price? And under what circumstances will word price be affected?
52d6c6af
CC BY-SA 4.0
2019-06-20T03:20:45.540Z
World price will be affected if the country is "large enough." Try look up the definition of small vs large economy. If that's the case, then things get a bit complicated. The flat line of the world supply curve wouldn't be flat anymore.
Art
CC BY-SA 4.0
2019-06-20T03:54:45.360Z
In the large economy scenario, does this mean that the economy is a substantial importer of the good, and so applying an import tariff changes the global equilibrium and moves the position on the demand curve? Are you suggesting that this would therefore mean that overseas consumers would in effect subsidise or pay for a portion (not all) of the tariff?
52d6c6af
CC BY-SA 4.0
2019-06-20T02:41:40.477Z
2019-06-20T02:41:40.477Z
Art
<p>If a state places a tariff on a good, domestic manufacturers of that good become more price-competitive in the domestic market at the expense of overseas suppliers. </p>

<p>Could this be said to be a policy choice that subsidises that industry?</p>

<international-trade>
Can tariffs be said to subsidise domestic industry?
52d6c6af
# Can tariffs be said to subsidise domestic industry?

(Asked by: username_0 on 2019-06-17)

If a state places a tariff on a good, domestic manufacturers of that good become more price-competitive in the domestic market at the expense of overseas suppliers.

Could this be said to be a policy choice that subsidises that industry?

**Tags:** international-trade


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## 1 answers

### Answer by username_1 on 2019-06-20. Score: 2 | Accepted answer

This is how I read your question:

```
If a state places a tariff on a good,             <- added a comma here
domestic manufacturers of that good become
more price-competitive in the domestic market
at the expense of overseas suppliers.

Could this be said to be a policy choice that subsidies that industry?

```

Assuming the country is a small and could not affect world price, then the answer is yes. To be more precise, an import tariff is equivalent to product-specific subsidy PLUS a consumption tax of that product.

**Subsidy + consumption tax:** Domestic producers gain the subsidized amount for each unit sold. Buyers pay for that extra amount the producers gain.

**Tariff:** The price of import goods (world price) rises, so domestic producers can sell at a higher price. The buyers are the ones who pay for that price difference.

"Credible" sources:

* <http://internationalecon.com/Trade/Tch95/T95-3.php>
* <https://www.cairn.info/revue-reflets-et-perspectives-de-la-vie-economique-2004-1-page-25.htm>, Section 4

> **Comments:**
> **username_0**: How does this change if the tariff affects world price? And under what circumstances will word price be affected?  
> **username_1**: World price will be affected if the country is "large enough." Try look up the definition of small vs large economy. If that's the case, then things get a bit complicated. The flat line of the world supply curve wouldn't be flat anymore.  
> **username_0**: In the large economy scenario, does this mean that the economy is a substantial importer of the good, and so applying an import tariff changes the global equilibrium and moves the position on the demand curve? Are you suggesting that this would therefore mean that overseas consumers would in effect subsidise or pay for a portion (not all) of the tariff?  

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