CET 2026 Slot 1 · MBA CET 2026 Attempt 1 Slot 1 Question Paper with Solutions – Page 13

Read the passage carefully and answer the questions that follow. Choose the correct alternative from the given options based only on the information in the passage.

Tariffs have long been a significant instrument in the economic policy of the United States, used to regulate international trade, protect domestic industries, and exert geopolitical influence. A tariff is essentially a tax imposed on imported goods, making foreign products more expensive in the domestic market. The stated objective behind imposing tariffs is often to safeguard local manufacturers from cheaper imports and to encourage domestic production. However, the broader economic implications of tariffs are complex and frequently debated.

In recent decades, the USA has employed tariffs not merely as a revenue-generating mechanism but as a strategic tool to address trade imbalances. When the value of imports significantly exceeds exports, policymakers argue that tariffs can reduce dependency on foreign goods and revive domestic industries. For instance, tariffs on steel and aluminum were justified on grounds of national security, with the argument that a strong domestic metals industry is essential for defense preparedness. Such measures, however, often invite retaliation from trading partners, resulting in trade wars that can disrupt global supply chains.

Critics of tariffs contend that while they may offer short-term protection to specific sectors, they impose long-term costs on the economy. Higher import prices are often passed on to consumers, leading to inflationary pressures. Moreover, domestic firms that rely on imported raw materials may face increased production costs, reducing their competitiveness in both domestic and international markets. Economists frequently emphasize that tariffs distort market efficiency by interfering with the principle of comparative advantage, under which countries specialize in producing goods they can make most efficiently.

The impact of US tariffs extends beyond national borders. Developing countries that depend heavily on exports to the American market can experience reduced demand, affecting employment and economic growth. At the same time, multinational corporations may reconfigure their supply chains to circumvent tariffs, shifting production to alternative countries rather than bringing it back to the USA. This outcome often contradicts the original intent of tariff policies.

Thus, while tariffs remain a powerful policy instrument for the United States, their effectiveness depends on careful calibration. When used indiscriminately, tariffs risk triggering economic inefficiencies, diplomatic tensions, and unintended consequences that may outweigh their perceived benefits.