In 2007, European Union (EU) negotiators have offered to cut tariffs for Latin American bananas to avoid "banana wars." What are the effects of a cut in tariffs?

Question

Quizplus · Accepted Answer

A cut in tariffs generally makes imported goods cheaper, leading to an increase in the quantity imported as they become more competitive against domestic products. This does not necessarily increase the price for consumers; it typically lowers it. It also doesn't increase the quantity produced domestically (in fact, it might decrease due to increased competition) nor does it increase tariff revenue (since the rate is lower, even if volume increases, the total revenue might not increase and could decrease).

In 2007, European Union (EU) Negotiators Have Offered to Cut