Governments influence trade by creating rules and regulations which govern the ways businesses should operate. Governments have the sovereign power to intervene in trade activities by deciding what comes in into their nation and what goes out, in order to achieve economic, social and political objectives. They can do this by controlling or restricting companies through a ban or encourages business operation through subsidies. Governments have the right to grant or withhold permission for a company to do business within their political boundaries and control its citizens when it comes to conducting business.
To do this the government has a number of options to use in influencing trade, they can use instruments of trade control such as tariffs and non-tariff barriers. The choice of which trade control to use will depend on what the government is trying to achieve. Governments can also use protectionist policies by subsidizing domestic companies with the aim of creating fair competition with foreign businesses.