Tariffs can lead to retaliation from other countries.

• A. Tariffs can lead to retaliation from other countries
• B. Tariffs always decrease government revenue
• C. Tariffs have no impact on domestic production
• D. Tariffs are always universally accepted

Answer: (A)

Tariffs raise the price of imports, which can protect domestic producers but also provoke responses from trading partners. When one country imposes a tariff, others often retaliate with their own tariffs on that country’s goods to defend their own industries and market shares. This back-and-forth can escalate into a tariff war, reducing overall trade, raising prices for consumers, and potentially hurting both economies. That potential for retaliation is a realistic consequence of using tariffs.

The statement about tariffs always decreasing government revenue isn’t accurate because tariff revenue depends on the rate and the change in trade volumes, which can vary over time. Tariffs do influence domestic production—often encouraging some domestic production and protecting jobs in certain industries, while raising costs for consumers and other sectors. And tariffs aren’t universally accepted; public and political support for them varies by interest group and country.