Introduction to the Trade Barriers and Protectionism

What you’ll learn to do: explain how barriers to trade (like tariffs, quotas and non-tariff barriers) affect businesses, consumers and workers in the economy

Poster showing a stage coach and a vintage car with passengers.

We have seen that international trade raises the standard of living for participating countries. Indeed, free trade maximizes the gains from international trade. While each country is better off through international trade (or more precisely, the average resident is better off), that doesn’t mean that all individuals are better off. Free trade is a policy and like every policy, there are winners and losers. The winners are consumers and workers, managers and owners of firms that produce goods whose demand increases through international trade. The losers are workers, managers and owners of firms whose demand decreases as a result of international trade; that is, firms who produce substitutes for imports.

Protectionism is an attempt to mitigate the harm done by international trade. The most prominent argument for tariffs, quotas and other barriers to trade is to protect jobs and incomes that otherwise would be at risk from foreign imports. This section will explore these issues.