Expanding your business into international markets offers immense growth opportunities—but it’s not always smooth sailing. International commerce comes with its own set of risks and challenges that you’ll need to know how to navigate.
While customs tariffs often dominate the headlines, non-tariff barriers can have just as much of an impact on your business and the economy at large. These hidden hurdles can shift the competitive landscape in an instant, making or breaking businesses.
Understanding non-tariff barriers is crucial for businesses looking to expand internationally. Learn how non-tariff barriers impact trade, the challenges and opportunities they create, and the strategies you can use to navigate them successfully.
What are non-tariff barriers?
Non-tariff barriers (NTBs) are any trade measures or conditions—other than a tariff or export duty—that hinder, restrict, or complicate international commerce. Common examples include import quotas, licensing requirements, product quality standards, and embargoes.
While tariffs are often used to generate revenue or make foreign goods less competitive, governments use NTBs to address broader policy concerns, such as consumer safety, national security, and foreign relations. However, these measures can distort trade by raising costs or limiting foreign competition.
8 types of non-tariff barriers
Non-tariff barriers often shape trade volumes and market dynamics as much as traditional tariff barriers. Governments can use non-tariff barriers to regulate international trade or protect local industries.
NTBs come in various forms, from import licensing requirements to technical regulations and localization policies. Here are eight types of NTBs along with real-world examples from the 2024 National Trade Estimate (NTE) Report on Foreign Trade Barriers:
1. Licensing requirements
Import licensing requires businesses to obtain government approval before bringing certain products into a country. Some licenses are automatic, meaning they are granted as long as the necessary documentation is submitted. Others are non-automatic, requiring government review and approval before importation.
For example, India requires importers to apply for authorization before importing laptops, tablets, servers, and other restricted electronics. This non-automatic licensing system was introduced to promote domestic manufacturing, reduce reliance on Chinese imports, and enhance supply chain security. As a result, businesses must submit an application and wait for government approval before shipping these products.
2. Quotas
Quotas set strict limits on the quantity of goods that can be imported or exported within a specific time frame, directly influencing trade flows. These restrictions can protect local industries but may also lead to higher prices, supply shortages, or retaliatory trade measures.
Quotas are often subject to World Trade Organization (WTO) regulations, since they can distort competition and restrict free trade. However, some countries justify quotas for reasons such as food safety, environmental protection, or market stabilization.
For example, the European Union (EU) imposes quotas on US beef imports. Once the quota is reached, higher tariffs apply. That makes additional imports more expensive and reduces access for US producers. Because this EU-imposed quota was established as part of a negotiated trade agreement, the WTO allows the quota to remain in place.
3. Embargoes
An embargo is a severe trade restriction in which one country completely halts imports and exports with another, usually for political, security, or human rights reasons. Embargoes can have major economic consequences, limiting access to goods, resources, and international markets.
The US has maintained an embargo on Cuba since the 1960s, citing concerns over human rights violations, lack of democratic reforms, and Cuba’s ties to US adversaries. The embargo restricts most trade, though some exceptions exist for food, medicine, and humanitarian aid.
4. Sanctions
Sanctions are targeted trade restrictions designed to achieve specific policy objectives, such as national security, human rights enforcement, or geopolitical strategy. They can range from foreign exchange controls to sector-specific bans, limiting access to key goods, services, or financial systems.
Following Russia’s invasion of Ukraine, the US imposed sweeping sanctions that banned imports and exports in key industries. One of the most significant effects was on financial transactions—US financial sanctions cut off Russia from major payment processors, including Visa, Mastercard, PayPal, and Stripe. Without access to these platforms, cross-border ecommerce between the US and Russia has largely ceased.
5. Technical barriers to trade
Technical barriers to trade (TBTs) are regulations, standards, or procedures intended to ensure product safety, protect consumers, support environmental goals, or maintain industry standards. These non-tariff measures can vary by country and may require businesses to adapt their products to meet different market requirements.
TBTs also apply to services. For example, the United Kingdom requires local professional experience for chartered accountants, restricting qualified foreign accountants from practicing there.
6. Subsidies
Governments provide subsidies, or financial aids, to local businesses to enhance their competitiveness against foreign imports and encourage them to sell their goods at lower prices. These can take the form of direct payments, tax breaks, or low-interest loans.
China heavily subsidizes key industries to boost domestic production, support strategic sectors, and reduce reliance on foreign suppliers. The impact of these subsidies extends beyond China, disrupting global markets and lowering prices to levels that foreign competitors struggle to match.
For example, China’s steel industry benefits from massive government subsidies, leading to overproduction that distorts global prices. The flood of cheap steel has forced US and European steel producers to cut production, close plants, and lobby for protective tariffs.
7. Customs procedures
Customs procedures are administrative regulations, processes, and requirements that goods must undergo when entering or leaving a country. They could include pre-shipment inspections, documentation requirements, and customs valuations. Such procedures, while often necessary for regulatory compliance and security, can sometimes act as NTBs by creating additional costs and delays for importers and exporters.
For example, Japan has strict maximum residue limits (MRLs) for pesticide residues on food, which are set well below levels that could harm health. If one producer from a country violates these limits, Japan increases scrutiny on all shipments from that country. After a second violation, all shipments of that product are held for testing, causing delays and uncertainty for exporters.
This enforcement can create significant challenges for compliant businesses, as they are affected by the actions of a single producer.
8. Digital trade barriers
Digital trade barriers restrict online services and data flows across borders, often through data localization rules, cybersecurity rules, and licensing requirements. Governments use these barriers to regulate data, control digital markets, and protect national security, impacting cross-border ecommerce, cloud computing, and digital services.
For example, Korea requires a license to export location-based data, such as mapping and navigation services. However, no foreign company has ever received approval, effectively blocking US firms from offering these services in Korea.
How international bodies shape non-tariff barriers
International bodies shape NTBs by regulating, monitoring, and resolving trade disputes. While some NTBs are allowed, global organizations ensure they do not distort trade unfairly. By aligning NTBs with international standards, these bodies help create a more predictable and fair global trading system.
The two most significant international bodies in foreign trade regulation are:
1. The World Trade Organization (WTO)
The World Trade Organization (WTO) serves as a global forum where governments negotiate trade agreements aimed at liberalizing trade and ensuring fair competition. One of its key roles is to reduce arbitrary trade restrictions and ensure that NTBs are applied transparently and for legitimate policy reasons, rather than as disguised protectionism.
Its key agreements include the Technical Barriers to Trade (TBT) Agreement, Sanitary and Phytosanitary (SPS) Agreement, and the Trade Facilitation Agreement (TFA).
2. The United Nations Conference on Trade and Development (UNCTAD)
The United Nations Conference on Trade and Development (UNCTAD) strives to ensure the fair and equitable integration of developing countries into the global economy. When it comes to NTBs (also known as non-tariff measures, or NTMs), UNCTAD plays a key role in enhancing transparency, improving access to information, and promoting regulatory cooperation. These efforts help to reduce unnecessary trade restrictions while upholding legitimate public policy objectives.
Brief history of non-tariff barriers
The dominance of tariffs (pre-1914)
Before World War I, tariffs were the primary tool for regulating trade. Governments relied on customs tariffs to control imports, protect local industries, and generate revenue. In many countries, tariffs accounted for a significant portion of federal income.
The shift to NTBs (1929-1945)
According to a 2001 study of trade during the Great Depression, trade between industrialized nations declined by approximately 30% between 1929 and 1932. The study estimates that 8% of this decline was caused by tariff wars, largely triggered by the Hawley-Smoot Tariff Act of 1930.
As tariffs rose to unsustainable levels, countries turned to NTBs—such as foreign exchange restrictions, import quotas, and customs delays—as alternative trade barriers that were harder to challenge under existing agreements. After the war, global leaders realized NTBs could hinder post-war economic recovery, leading many countries to start talks about setting rules for global trade.
The formation of GATT (1947-1994)
In 1947, 23 nations signed the General Agreement on Tariffs and Trade (GATT) to establish global trade rules aimed at reducing tariff barriers to trade and promoting economic growth. During its 47-year existence, the GATT articles contributed to unprecedented growth in global trade (over 8% growth per year between 1950 and 1973).
However, as certain countries reduced tariffs, they increasingly began introducing non-tariff barriers to maintain control over imports.
The WTO and the modern regulation of NTBs (1995-today)
In 1995, the World Trade Organization (WTO) replaced GATT, expanding its oversight beyond goods to include services and intellectual property. The WTO Agreement also introduced new dispute resolution mechanisms, making it easier for WTO members to challenge unfair trade practices. Today, with 166 members, the WTO oversees 98% of international trade and regulates NTBs through various agreements, including the TBT Agreement and SPS Agreement.
As free trade agreements and WTO rules limited the ability of importing countries to impose tariffs, governments turned to NTBs as alternative tools to regulate trade in their favor. Between 1995 and 2012, the number of NTBs quadrupled, and by 2018, their trade costs were more than double those of customs tariffs.
Benefits of non-tariff barriers
Non-tariff barriers are a critical part of foreign trade regulation and can offer several benefits—particularly for exporting countries and their domestic markets. While often viewed as restrictions, they also serve as strategic tools for achieving specific policy objectives.
Understanding the benefits of non-tariff barriers can provide a new perspective on their role in international trade:
Protecting domestic industries
NTBs such as import quotas can protect weak national industries from foreign competition. By limiting the number of goods entering from foreign markets, these industries get a better chance to grow and compete globally. This is especially the case for economies looking to nurture and develop young industries.
Regulation and quality control
Introducing NTBs like technical standards ensures imported products meet specific quality criteria. This aims to protect consumers and uphold domestic market standards, fostering trust in foreign trade. Over time, consistently high standards can become a selling point for a country’s exported goods.
Economic policy flexibility
Such restrictions give governments more leeway in managing their economic policies. By using tools like export subsidies and import deposits, states can better adapt to the shifting landscapes of the global economy. This flexibility can be crucial when responding to economic crises or negotiating trade deals.
Strategic trade facilitation
License systems and customs procedures can facilitate trade by making it more organized and efficient. This benefits the domestic market and establishes a standard that can be advantageous in foreign trade agreements. Effective trade facilitation can also reduce costs for exporters and importers, boosting overall trade volumes.
Influence over foreign markets
Countries can wield influence over foreign markets by imposing NTBs like import bans. This can be a strategic move to negotiate better trade terms or to serve specific interest groups domestically. It also provides a lever for diplomatic relations, enabling a country to exert soft power through trade policies.
Diversification of the economy
By supporting weak industries through non-tariff barriers such as subsidies, countries can diversify their local economies. In industrialized countries, this diversification can lead to the development of new sectors, adding resilience to the economy. Economic diversification also offers long-term benefits, including better protection against market volatility and economic downturns.
Drawbacks of non-tariff barriers
While non-tariff barriers are useful tools for regulating trade and supporting local industries, they have some disadvantages. These drawbacks can impact both the issuing country and its trading partners, leading to inefficiencies and tensions in international trade relations.
Let’s take a look at the downside to non-tariff barriers:
Increased costs for consumers
NTBs can lead to higher prices for imported goods. These added costs are often passed onto the consumer. As a result, people may have less disposable income for other goods and services.
Inefficiency in resource allocation
Trade barriers can inadvertently support weak industries at the expense of more efficient sectors. When resources are directed toward industries that are not competitive, it can result in an inefficient allocation of national resources. This may hamper growth and productivity in the long run.
Diplomatic strains
Legal barriers and trade restrictions can lead to diplomatic tensions between countries. When one nation imposes barriers, its trading partners may retaliate with their own measures. This escalation can deteriorate diplomatic relations and even lead to trade wars.
Complexity in trade
While tariffs tend to be more transparent and structured, NTBs can be unpredictable and vary widely between markets. “There isn’t a simple guidebook to navigate them,” says Holly Wade, executive director of the National Federation of Independent Business (NFIB) Research Center. “If businesses don’t do their homework or aren’t proactive in figuring these things out, those barriers can make it harder for them.”
Because NTBs shift frequently, exporters and importers must stay constantly updated on compliance requirements. Unexpected licensing rules, product standards, or bureaucratic delays can increase operational costs, making it especially difficult for small and medium-sized businesses to compete.
Encourages smuggling
Trade restrictions can inadvertently encourage the illegal trade of restricted or highly taxed goods. As formal routes become more cumbersome or expensive due to non-tariff barriers, smuggling can become a more attractive option. This undermines national and ecommerce laws and results in a loss of revenue for governments as well as for companies doing legitimate business.
Undermines open trade agreements
Non-tariff barriers can run up against the principles of open trade agreements. While a country may lower traditional tariffs as part of an agreement, the introduction of non-tariff measures can cancel out the benefits. This not only limits market access but also erodes trust among trading partners.
3 strategies to overcome non-tariff barriers
Non-tariff barriers can make international expansion feel overwhelming, but with the right approach, they don’t have to be a roadblock. By taking strategic steps like the ones below, you can navigate these challenges more effectively and position your business for success in global markets.
1. Start small
Because every country comes with its own convoluted set of non-tariffs, it’s best to start small. “Don’t go try and conquer the world,” Holly advises. “Having too big a vision initially can be overwhelming, frustrating, and far too time-consuming.”
Instead, focus on expanding to one market at a time, prioritizing those that are most accessible, like Canada or Mexico. These neighboring countries have established trade agreements with the US and have programs that make exporting easier for small businesses.
2. Talk to peers
Connecting with other business owners—whether through industry groups, trade associations, or networking events—can provide real-world insights into overcoming regulatory challenges, securing reliable logistics partners, and adapting to cultural differences in business practices.
“SCORE, in particular, offers a mentoring program that matches business owners with experienced professionals in their specific areas of interest,” says Holly. “This eliminates a lot of the initial legwork—saving time and helping businesses navigate best practices for expanding their specific goods or services into international markets.”
3. Leverage government and trade resources
If you run a US-based business, there are a variety of federal resources available to help navigate non-tariff barriers. “Using government resources can be valuable because, regardless of the administration, promoting US exports is always a priority,” says Holly.
The US Commercial Service is a great place to start. It offers a wealth of online resources and customized services to help businesses navigate the complex aspects of international trade, including NTBs.
Non-tariff barriers FAQ
What is the purpose of a non-tariff barrier?
Governments use non-tariff barriers to achieve policy objectives such as protecting local industries, maintaining product quality and safety, and advancing foreign policy. Compared to tariffs, NTBs offer strategic advantages, such as reducing the risk of trade retaliation, complying with WTO rules, and providing greater diplomatic flexibility. These barriers can target specific countries, industries, or commodities.
What are the most common non-tariff barriers?
The most common non-tariff barriers include quotas, licensing requirements, product quality standards, and regulatory approvals. Any rule, regulation, or policy that restricts trade without directly imposing a tax qualifies as an NTB.
How might non-tariff barriers impact my business?
Non-tariff barriers can affect your business by limiting market access or increasing costs. These barriers can be in effect for a definite period and may target specific countries or sectors, impacting your supply chain and competitive dynamics.
How do recent geopolitical changes affect non-tariff barriers for my business?
Recent geopolitical shifts—such as rising US-China trade tensions, the Russia-Ukraine war, and the EU’s push for economic self-sufficiency—have led to an increase in non-tariff barriers. Governments are tightening export controls, imposing stricter import regulations, and enforcing national security reviews to reduce dependence on rival nations. For your ecommerce business, this could mean higher compliance costs, restrictions on certain goods, and shipping delays.
What industries are most affected by non-tariff barriers in 2024-2025?
According to the 2024 US National Trade Estimate Report, non-tariff barriers are having the greatest impact on agriculture, technology, manufacturing, and ecommerce. Increased import restrictions, regulatory compliance requirements, and market access limitations are creating significant challenges for businesses in these sectors.
