Difference Between Tariff and Quota

Difference Between Tariff and Quota

Trade between nations has always been a necessary event since the days when ‘trade by batter’ was a rampant activity. With the diversification of trade methods, national authorities have put in place some important policies to help protect their economies. Two such protectionisms are Quota and Tariff.

Right now, you’re probably thinking, ‘what is the difference between tariff and quota?’ Let’s start by determining the tariff and quota definitions and then the difference between tariff and quota is. To get a clear picture, let’s take a look at the definition of both.

Definition of Tariff

Definition of Tariff

Definition of tariff: Tariff is a fee incorporated by a governing body on products brought into their country from other nations. There are two types of tariffs and they are; the distinct tariff and ad-valorem tariff.

District Tariff: This is a fixed amount to be paid on a certain product and it depends on the type of product.

Ad-valorem Tariff: This tariff is calculated according to the value of the imported product.

Definition of Quota

Definition of quota: A quota is a limitation put in place by an authoritative body which serves as a guide to prevent an excessive quantity of a product or its equivalent value from being taken out or introduced into a country, for a specified period of time.

Tariff vs Quota Comparison Table

The table below gives more detailed info on the difference between quota and tariff. A better understanding of the tariff and quota difference can help you as an individual with a business.

Basis of ComparisonTariffsQuotas
Basic DefinitionThis is a restrictive fee imposed by a governing body on goods brought into a federation.This is a constraint placed by a governing body on the number of a product, or its equivalent value, that is introduced into a federation within a certain period of time.
What it affectsTariffs affect the fee of the commodities on which they are charged.Quotas personally affect the available number of the commodities for which they are requested.
Effects on UtilizationTariffs eventually lead to a reduction in the consumption of the commodities in which they are charged.There is no necessary correlation in the rate at which goods are consumed after a quota has been imposed on them.
Revenue GainedThe revenue from the imposition of tariffs shall all be paid to the authorities of the federation which levied the tax.Revenues from the requested quotas go to the manufacturers or importers of the products.
Level of RestrictionTariffs are not as restrictive for those who can afford them.Quotas are a more powerful form of protectionism. They are powerful enough to provoke trade wars between countries.

Conclusion of the Main Difference Between Tariff vs Quota

Both quotas and tariffs are mechanisms that have been created to help a federation build its economy and sometimes to increase the political influence it has over another. We hope this article has shed some light on the difference between tariffs and quotas.