Tracing Tariff Policies: Implications for Income Inequality and Economic Equity

Abstract

This study empirically traces how tariff and protectionist trade policies shape income inequality and economic equity, and how these income distributional pressures call for effective governance and policy frameworks in developing economies. It works on three specific latent constructs: Tariff Policy Impact (TPI), Income Inequality and Economic Equity (IIE), and Policy Framework Effectiveness (PFE), and tests three hypotheses using Partial Least Squares Structural Equation Modelling (PLS-SEM). Data were gathered through purposive sampling of 99 economists, finance professionals, trade policy analysts, development finance professionals measured on a five-point Likert scale. The measurement model demonstrated strong reliability and validity, and all three structural paths were supported: tariff policy significantly influenced income inequality (β = 0.427), while both income inequality (β = 0.462) and tariff policy directly (β = 0.229) predicted policy framework effectiveness. A significant indirect effect (TPI→IIE→PFE, β = 0.197) confirmed partial mediation, with income inequality accounting for roughly 46% of tariff policy's total effect on framework effectiveness, and the predictors jointly explaining 35.6% of its variance. The findings indicate that inequality works as an active transmission channel supporting ex-ante distributional impact assessments, DEI conditionality in trade agreements, and sequenced reforms that stabilise distributional outcomes alongside liberalisation.