The effective rate of protection for steel, vehicles and electrical goods, however, went much higher, up to 300 per cent.

The domestic shoe maker is afforded a 60% effective rate of protection per dollar of value added.

An alternative that yields an identical answer is that the effective rate of protection equals ), where:

The effective rate of protection is used to estimate the protection really afforded to domestic producers at each stage of production, i.e., how much extra they can charge and still be competitive with imported goods.

If the total value of the tariffs on importable inputs exceeds that on the output, the effective rate of protection is negative, i.e., the industry is discriminated against in comparison with the imported product.

In economics, the effective rate of protection is a measure of the total effect of the entire tariff structure on the value added per unit of output in each industry, when both intermediate and final goods are imported.

The effective rate of protection reveals the extremely adverse effect of tariffs that escalate from low rates on raw materials to high rates on intermediate inputs and yet higher rates on the final product as, in fact, most countries' tariff schedules do.