Tariff vs. Subsidy: What's the Difference?
Read the comparison below, or explore it visually. Create a visual lesson comparing tariff and subsidy using available credits or plan allowance.
Both are government tools to help domestic industry, but they pull opposite levers. A tariff is a tax on imported goods, making foreign products more expensive so local ones compete better. A subsidy is financial support given to local producers, making their goods cheaper to make or sell. One penalizes imports; the other rewards home production.
At a glance
| Tariff | Subsidy | |
|---|---|---|
| What it is | Tax on imports | Government support to producers |
| Effect on price | Raises price of foreign goods | Lowers cost of local goods |
| Who pays | Importers (often passed to buyers) | The government (taxpayers) |
| Goal | Discourage imports | Encourage local production |
| Effect on budget | Raises revenue | Costs money |
Which should you use?
A government uses a tariff when it wants to shield domestic industries by making imported competitors pricier — though it can raise costs for consumers and invite retaliation.
A government uses a subsidy when it wants to boost a home industry directly by lowering its costs to compete — though it can strain the budget and sometimes distort markets.