Define “tariff escalation.”

Tariff escalation refers specifically to the phenomenon where tariffs are set at higher rates for processed goods compared to raw materials. This practice is often implemented to encourage domestic processing of raw materials within a country, allowing local industries to develop and adding value to those raw materials before they are exported. By taxing processed goods at a higher rate, governments aim to protect their own manufacturing sectors and create jobs, making it less economically viable for businesses to import finished products that could easily be produced domestically.

In contrast, the other options do not accurately depict tariff escalation. A reduction in tariffs over time applies to all goods, not specifically to processed versus raw materials. A policy for eliminating tariffs completely does not relate to the comparative rates of different goods. Lastly, a fixed tariff imposed on all imported goods does not reflect the variable nature of escalation, which is characterized by different rates based on the degree of processing of the goods in question. Thus, the correct definition aligns perfectly with the concept of tariffs increasing more for processed goods than for raw materials.