If the government wants to maximize the amount of tariff revenue it collects on anyone good, it has to reduce employment and lower economic output.
Since tariffs are taxes, the government earns more as imported goods enter the domestic market. Domestic industries also benefit from the reduced competition as import prices are artificially high. Tariffs primarily benefit importing countries. Because the importing country sets the policy and receives the money.
Tariff revenue mainly has three functions. It functions as a source of income, protects domestic industries and eliminates trade distortions (punitive function). The revenue function arises from the fact that tariff revenue is the source of government funding.
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