Interactive widget exploring free trade versus protectionism in the Australian economy
Protecting jobs costs everyone else more
Tariffs and quotas shield specific industries from foreign competition, preserving local jobs in those sectors. But that protection raises prices for all consumers and reduces overall economic efficiency. Drag the slider to see how the trade-off between protection and efficiency plays out.
Drag to shift between free trade and protectionism
Free Trade — Maximum Efficiency
A tariff is a tax on imported goods that raises their price in the domestic market. When Australia imposes a tariff on steel imports, foreign steel becomes more expensive, making local steel producers more competitive. This protects jobs in the Australian steel industry. However, every industry that uses steel — construction, manufacturing, car assembly — now pays higher prices for their raw materials. Those costs flow through to consumers as higher prices for buildings, machines, and cars. The protected steel workers benefit, but millions of consumers pay the cost through reduced purchasing power.
Know This
Protection shields specific industries from foreign competition but raises consumer prices and reduces overall economic efficiency — the many pay more so the few keep their jobs.