EFFECT OF TARIFFS ON INFLATION

Abstract

In recent years, tariffs have become a prominent tool of economic policy globally, especially amid rising protectionism, geopolitical tensions, and the need to support domestic industries. In the Indian context, tariffs have been revised across a wide range of sectors ranging from electronics to agriculture with varying motivations. However, one recurring debate remains: Do tariffs contribute to inflation in the domestic economy? This report delves deep into the relationship between tariffs and inflation. By combining a structured primary survey of 76 respondents, the study evaluates how tariffs affect prices and purchasing power. Our findings indicate that tariffs do have a tangible effect on inflation, particularly in sectors where import dependence is high. Consumers report higher prices in goods like electronics and edible oils shortly after tariff changes. Traders and SMEs face increased costs of inputs and equipment, which in turn get passed on to end-users. However, the effect is not uniform: essential goods and critical intermediate goods show sharper inflationary transmission than luxury items. The study concludes by recommending a balanced tariff policy that considers both developmental goals and inflation sensitivity.