Terms that newcomers to the world of imports need to know
The field of economics is one the least understood, yet the economy is part of everyday life. Newcomers to the world of importing goods from China may find the following explanations useful:
1. Imports versus exports: Imports are goods or services that are produced abroad. Exports are goods or services that were produced domestically and sold abroad. Imports from China to the US greatly exceed exports from the US to China. In 2008, $337,772.60 worth of goods were imported from China, whereas only $69,732.80 worth of goods were exported to China.
2. Duties and tariffs: A duty is a tax or fee charged on imports entering a country as a way of collecting revenue. A tariff is a system of taxes imposed by governments on goods crossing into the country’s borders and are imposed as a way of limiting goods from abroad. High tariffs are called “protectionism” because the high tax makes buying domestic products less expensive, thus “protecting” national businesses. Whether tariffs are harmful or beneficial is an ongoing economic debate. Currently, China and the US are seeking to avoid protectionism so goods can freely flow back and forth, within limits.
3. Devaluing currency and “stronger” money: Devaluing currencies is when the monetary authority of a country officially lowers the value of its currency beneath the value of another country’s currency using a fixed exchange rate system. This means the devalued money will be “worth less” than the other country’s money. The country with the currency that is worth more will have the “stronger” currency. So if the US dollar is stronger than the Chinese yen, it will take more than one yen to buy one US dollar.