What is a Customs Barrier

A customs barrier is any implementation of fees, rules or regulations designed with the intention to limit international trade.

BREAKING DOWN Customs Barrier

A customs barrier, or trade barrier, acts to limit trade across borders by creating and enforcing various restrictions. These restrictions can come in the form of tariffs, levies, duties and trade embargoes and are put in place with the intentions to discourage trade.

Customs barriers may be put in place by governments who are looking to give an advantage to a domestic industry over that of a foreign competitor. In some instances, these levies are put in place to limit exports of goods and services that may be vital to the local economy. Customs barriers may also be put into place in response to undesirable actions by other nations.

Many economists feel that these customs barriers should only be used as a last resort, as they may create hostile trade environments, but they agree there are valid reasons to put them into place. Whether it’s to protect an emerging domestic industry or a tactical effort in entering a trade war, these barriers have their place in international trading.

Customs Barriers in the News

The United States has been in the news recently for imposing tariffs on goods from other nations. Steel and aluminum imports currently have tariffs in place, and the U.S. has proposed tariffs on many products from China in response to concerns about national security and intellectual property theft. In response, China has place retaliatory tariffs on goods from the United States, which has already begun to negatively impact farmers within the country.  

The steel industry has reported record sales thanks to the increase in prices that have come along with the trade sanctions. Reliance Steel & Aluminum (RS) reported record sales after the 18 percent increase in prices, according to CNN. However, not all business is booming thanks to the increase. Harley Davidson, General Motors, General Electric, 3M and many other manufacturers are hurrying to increase prices and adjust their supply chains to combat the rising prices that have been impacting their profits since the tariffs began. Not all steel companies are experiencing the rise in earnings from the price bump, either. Many smaller companies are not seeing an increase in revenues like their larger counterparts. Also, some companies are currently locked into fixed pricing agreements and will not see a change in their numbers until those contracts expire and can be re-written.

While these proposed and enforced tariffs seem to have both pros and cons, some economists warn that they will usher in another recession like the one from the mid-2000’s if they are not wrapped up soon.