What is trade policy?

Trade policy can be defined as a goal, rules, standard, goals, and regulations that are involved in trade between countries. These policies are particular to a specific country and are formed by its public officials. A country’s trade policy covers taxes imposed on inspection regulations, import and export, and tariffs and quotas.

Under this policy, the government protects domestic manufacturers from foreign competition. The protection from import is done in two forms:

• Quotas- It specifies the number of goods that can be imported.
• Tariffs- It is a tax that is imposed on imported products; this tax makes imported products more costly and discourages their use.

The purpose of quotas and tariffs is to restrict imports and, hence, protect domestic industry from foreign competition.