A tariff is a tax levied on imported goods, raising their price. A quota is a physical limit on the quantity of a good that can be imported. Both are trade barriers that restrict international trade, but they work through different mechanisms and have different distributional effects.
Tariffs vs Quotas Tariffs and quotas are the two most common trade barriers that governments use to restrict imports and protect domestic industries. Both reduce the volume of international trade and raise domestic prices, but they operate through different mechanisms — one through price, the other through quantity — and this leads to different effects on government revenue, consumer welfare, and market efficiency. Key Takeaways A tariff is a tax on imports — it raises the price of foreign goods