Tariffs tend to have which of the following effects on consumers and domestic producers?

• A. Tariffs raise prices for consumers on imported goods and can protect domestic producers but may reduce overall welfare.
• B. Tariffs always lower prices for consumers and increase national welfare.
• C. Tariffs have no impact on prices or welfare.
• D. Tariffs only affect exporters, not domestic consumers.

Answer: (A)

Tariffs raise the price of imported goods for consumers because the added duty is passed along in the price you pay at the store. With imports more expensive, domestic producers often gain from reduced foreign competition, which can help them raise or protect their own profits. But this protection comes at a cost: overall welfare tends to fall because higher prices reduce what consumers can buy, and resources may be steered toward protected domestic industries that wouldn’t be as efficient in a free-trade environment. So you get higher consumer prices, some help for domestic producers, and a potential drop in total welfare, which is why this choice best captures the typical effects of tariffs.