Question of the Day – U.S. PRESIDENT ANNOUNCED A 25% TARIFF ON INDIAN IMPORTS
QOTD April 19,2026
With reference to tariffs in international trade, consider the following statements:
- A tariff is a tax imposed on imported goods.
- Imposition of tariffs generally increases the price of imported goods in the domestic market.
- Tariffs are prohibited under the World Trade Organization framework.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3
Answer: (a) 1 and 2 only
Explanation:
Statement 1 is correct
A tariff is a customs duty imposed on imports.
Statement 2 is correct
Tariffs raise the cost of imports, making them more expensive domestically.
Statement 3 is incorrect
WTO allows tariffs but regulates them through agreed rules and bindings.
Why in news–
The U.S. tariff on Indian imports 25% has been announced by the President of the United States, raising concerns over trade relations between India and United States. The move is expected to impact key export sectors and has revived debates around protectionism, trade deficits, and dispute resolution mechanisms under the World Trade Organization.
There are more questions from this topic that you should practice to make your concepts stronger.
Practice Questions (PQ)
PQ1.Consider the following statements:
- Tariffs are used as a tool of protectionism.
- Higher tariffs can reduce imports by making foreign goods costlier.
- Tariffs always lead to an increase in exports.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3
Answer : (a) 1 and 2 only
Explanation:
Statement 1 is correct
Tariffs protect domestic industries from foreign competition.
Statement 2 is correct
Higher prices discourage import consumption.
Statement 3 is incorrect
Tariffs do not necessarily increase exports; they mainly affect imports.
PQ2. Consider the following statements:
- Trade disputes between countries can be resolved through the WTO dispute settlement mechanism.
- The Most Favoured Nation (MFN) principle ensures equal trade treatment among WTO members.
- A country can arbitrarily increase tariffs beyond its WTO commitments without consequences.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3
Answer: (a) 1 and 2 only
Explanation:
Statement 1 is correct
WTO provides a structured dispute settlement system.
Statement 2 is correct
MFN ensures non-discriminatory trade practices among members.
Statement 3 is incorrect
Tariffs are bound under WTO commitments and cannot be arbitrarily increased.
PQ3.Consider the following statements:
- A trade deficit occurs when a country’s imports exceed its exports.
- Imposing tariffs can be used to reduce a trade deficit.
- Tariffs have no impact on domestic consumers.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3
Answer: (a) 1 and 2 only
Explanation:
Statement 1 is correct
Trade deficit arises when imports are higher than exports.
Statement 2 is correct
Tariffs can reduce imports and thereby impact trade deficit.
Statement 3 is incorrect
Tariffs often increase prices for domestic consumers.
Previous Year Question (UPSC Prelims)
With reference to the World Trade Organization (WTO), consider the following statements:
- WTO members are required to reduce tariffs on a reciprocal basis.
- The dispute settlement mechanism of WTO is binding on member countries.
- WTO allows countries to impose tariffs within their bound limits.
Which of the statements given above is/are correct?
(a) 2 and 3 only
(b) 1 and 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (a) 2 and 3 only
Explanation:
Statement 1 is incorrect
Tariff reductions are negotiated but not always strictly reciprocal in all cases.
Statement 2 is correct
WTO dispute rulings are binding on member countries.
Statement 3 is correct
Countries can impose tariffs up to their agreed bound rates under WTO rules.
