Tariff escalation refers to the practice of imposing higher tariffs on processed or manufactured goods compared to raw materials, with the tariffs increasing as the level of processing or value addition increases. This can protect domestic industries but also hinders developing countries from moving up the value chain.

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Tariff Escalation

Question 43

Multiple Choice

Tariff escalation:

A) is often alleged but there is little proof of it actually occurring.
B) was formally banned when countries signed on to the GATT back in 1947.
C) is said to occur when countries levy higher ad valorem tariffs for manufactured products than for raw materials, and they levy increasingly higher tariffs the higher the value added.
D) is just another word for a tariff war.

Correct Answer: