Tariffs are superfluous under conditions of domestic free trade. This is more so because the actions of domestic entrepreneurs and other market participants tend to be already adjusted to prevailing conditions of the market. Put simply, production tends to be fully adjusted to consumption demands. Barring the emergence of large maladjustments in the structure of the market in the short run, price discrepancies between the factor markets and the product markets are already in the process of being reconciled by daily actions of entrepreneurs. Under this state of affairs, the competitiveness of domestic entrepreneurs is not hampered given the absence of institutional restrictions. The more efficient producers in the domestic market are in better positions of competing in the world market. Therefore, the imposition of protective tariffs under conditions in which domestic products are competitive becomes superfluous.

Protective tariffs become “necessary” as a result of failing industrial policies in the domestic market. They are usually imposed because the industrial conditions of production in a country are unfavorable for competition; most particularly, competition with foreign products.