Tariffs are taxes on goods imported from another country. Nations place tariffs on goods from other countries in order to raise revenue and, often, to protect domestic industries from overseas competitors that can undercut domestic prices. Tariffs can be imposed across the board on all imports or, more common in modern times, on strategic commodities. Tariffs are usually imposed as a rate on the value of imported goods.
Traditionally, as a manufacturing powerhouse determined to undercut the growth of commercial rivals, Great Britain had high tariffs, as high as 50 percent at the beginning of the 18th century, but those began to fall throughout the 19th century as British industries become more specialized. The United States had high tariffs throughout much of its history in order to protect infant industries, but has had below-average tariffs in modern times.
In general, economists believe that high tariffs reduce economic growth, though the growth effects of tariffs can be unequally distributed and some industries can be disproportionately negatively impacted by lower tariffs. Many industrialized nations have negotiated free trade agreements that have reduced or eliminated tariffs on most goods, including the United States–Mexico–Canada Agreement (USMCA), which will take effect on June 1, 2020, and the European Free Trade Association (EFTA), comprised of the member states of the European Union plus Iceland, Liechtenstein, and Norway.
Currently, the countries with the highest tariff rates in the world (in weighted mean across all goods) are the island nations of Palau (34.6 percent), Solomon Islands (30.3 percent), and Bermuda (27.6 percent). The United States has one of the lowest tariff rates in the world, at 1.6 percent, while the global average among all nations is 2.6 percent.