When a country imposes tariffs on imported goods, one of the significant impacts is on domestic producers of products that compete with these imports. Among the options presented, the correct answer is that the domestic producers of import-competing products are forced to charge a lower price for their products to retain market share.
This happens because tariffs make imported goods more expensive due to the additional tax imposed on them. As a result, domestic producers may find themselves in a position where they need to lower their prices to compete effectively. If they don’t, they risk losing customers to the now relatively expensive imported products.
Additionally, while a tariff can protect domestic industries by providing them with a price advantage, it can also lead to higher prices for consumers. In essence, while the intent of tariffs may be to support local businesses, it creates a complex situation where the overall market dynamics are affected, leading to both challenges and opportunities for domestic producers.