Suppose that the free-trade price of a ton of steel is €500. (note: € is the symbol for the euro, a common currency used in 19 european countries, including finland.) finland, a small country, imposes a €60 per-ton specific tariff on imported steel. with the tariff, finland produces 300,000 tons of steel and consumes 600,000 tons of steel.

what is the purpose of this €60-per-ton tariff?

The purpose of the €60-per-ton tariff is to reduce imports of steel and promote domestic production of it.

With the tariff, the new price of imported steel in Finland is €560 per ton. This price is probably much higher that the production cost of locally produced steel (the question does not give enough information to affirm this with 100% certainty).

However, in the example, Finland is still importing half of the steel it needs. Policymakers will have to evaluate in the following months of years if the ratio of imported steel over total steel goes down, otherwise, the tariff will have failed.

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