Definition
Protectionism is the practice of using government policy to favor domestic industries over foreign competitors. Its tools include tariffs (taxes on imports), quotas (limits on import quantities), subsidies to local firms, and regulatory barriers.
It stands opposite to free trade, which lets goods and services move with few barriers. Most economists hold that open trade raises total welfare, but protectionist measures remain politically common because their costs are diffuse and their benefits concentrated.
Why it matters
How it works
A tariff raises the price of an imported good, letting domestic producers charge more and sell more. Consumers pay higher prices, and the economy loses some of the gains from comparative advantage.
The political economy explains its persistence: protected producers lobby hard because each gains a lot, while consumers rarely organize because each loses only a little. Common arguments for protection include national security, infant-industry development, and preventing job loss, each with genuine but limited validity.