Tariffs' Arguments vs. Drawbacks

Steps:

• Recall that import tariffs are taxes on imported goods, used to protect domestic industries or generate revenue.
• Evaluate each option to see if it supports using tariffs (positive argument) or opposes them (negative effect).
• Identify arguments: revenue generation, balance of payments improvement, and terms of trade gains.
• Spot the drawback: potential retaliation, which discourages tariff use.

Why D is correct:

• Retaliation by trading partners imposes counter-tariffs, harming exporters and escalating trade wars, per the principle of reciprocal trade policy in international economics.

Why the others are wrong:

• A: Tariffs directly generate government revenue from import duties, a classic fiscal argument.
• B: By raising import prices, tariffs reduce imports, improving the current account balance.
• C: In bilateral deals, tariffs can extract concessions, shifting terms of trade favorably for the imposing country.

Final answer: D