Which of the following instrument of trade protection directly raises the price of the commodity in the domestic economy?

Import tariff

The correct answer is Option 2: Import tariff.

An import tariff is a tax that is imposed on imported goods. This tax raises the price of imported goods, making them more expensive for domestic consumers. This can protect domestic industries from foreign competition, but it can also raise prices for consumers.

The other options are incorrect:

• Import substitution: Import substitution is a strategy that aims to reduce the reliance on imported goods by promoting domestic production. This can be done through a variety of measures, including tariffs, subsidies, and quotas. However, import substitution does not directly raise the price of imported goods.

• Export subsidy: An export subsidy is a payment made to domestic producers that export their goods. This can help to make exported goods more competitive in foreign markets, but it does not directly raise the price of imported goods.

• Import liberalization: Import liberalization is the removal of restrictions on imports. This can lower the price of imported goods for domestic consumers, but it can also put domestic industries at a disadvantage.

Therefore, the only trade protection instrument that directly raises the price of the commodity in the domestic economy is an import tariff.