What is a tariff?

A tariff is a tax imposed on imports or exports, primarily used by governments to control trade volumes and generate revenue. Tariffs can serve to protect domestic industries by making imported goods more expensive, thus encouraging consumers to buy locally produced items. In international trade, tariffs can also be used as a tool for negotiating trade agreements, as a government may reduce tariffs on certain goods in exchange for concessions from another country.

In contrast, the other options do not accurately describe a tariff. The first option refers to a tax on domestic sales, which does not pertain to international trade. The second option misrepresents the nature of tariffs as it implies that goods and services are the only considerations, overlooking the taxation aspect. The fourth option refers specifically to fines for trade agreement violations, which are distinct from tariffs as they focus on compliance rather than tax on trade goods. Consequently, the definition of a tariff as a tax on imports and exports is correct and aligns with its role in trade policy.