Final answer:
An export subsidy is a form of financial assistance given to domestic companies to support their exports, while a tariff is a tax imposed on imported goods. Both can protect domestic industries, but they differ in their impact on international trade.
Step-by-step explanation:
An export subsidy is a government payment or financial assistance given to domestic companies to encourage and support their exporting activities. It can take the form of direct payments, loans with low interest rates, or tax breaks. On the other hand, a tariff is a tax imposed on imported goods and services. While both an export subsidy and a tariff can be used to protect domestic industries, they differ in the way they affect international trade.
A subsidy is a form of financial assistance that helps make exports more competitive in the global market. It lowers the production cost for domestic companies and enables them to sell their products at a lower price. This can lead to an increase in exports and boost the domestic economy. However, an export subsidy can also distort international trade and create trade conflicts with other countries.
A tariff, on the other hand, is a tax imposed on imported goods. It increases the price of imported products, making them less competitive compared to domestic goods. This can protect domestic industries and encourage consumers to buy locally produced goods. However, tariffs can also limit choices for consumers, increase prices, and result in retaliatory tariffs imposed by other countries, leading to trade tensions.