ANTIDUMPING DUTY

A protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. In the United States, anti-dumping duties are imposed by the Department of Commerce and often exceed 100%. They come into play when a foreign company is selling an item significantly below the price at which it is being produced. The logic behind anti-dumping duties is to save domestic jobs, although critics argue that this leads to higher prices for domestic consumers and reduces the competitiveness of domestic companies producing similar goods.

Some people believe that a foreign company will even lower the price of the product it is “dumping” below its own cost to manufacture the good in order to drive domestic competitors out of business and later raise prices. Even when a foreign company sells its exports at the same or a higher price than they sell for in the company's home country, the importing country can decide that the exporter is guilty of “dumping” and impose an anti-dumping duty.

Anti-dumping duties are believed to distort the market because the government cannot determine what constitutes a fair market price for any good or service. This is because fair market value is whatever price the market will bear as determined by supply and demand.