What are tariffs?

Tariffs are essentially taxes imposed by a government on imported or exported goods. Their primary purpose is to increase the cost of foreign products entering a country, making domestic products more competitive in terms of pricing. By raising the cost of imports, tariffs can protect local industries from foreign competition, thus encouraging consumers to purchase domestically produced goods.

Tariffs can also be used as a tool for government revenue; the funds collected from these taxes can be used for public services and infrastructure. Additionally, tariffs might serve as a way for governments to express political or economic objectives by influencing international trade relations.

The other options do not accurately describe tariffs. Subsidies for exporting goods are financial supports intended to encourage exports, regulations on foreign investment pertain to rules governing how foreign entities can invest in a country's economy, and incentives for domestic production are measures to promote local manufacturing rather than tax-related barriers on trade. Therefore, the characterization of tariffs as taxes on imported or exported goods is not only accurate but central to understanding their role in international trade.