I’m reading for a quiz and I just ran into this point by an author:
“For a large country that can affect world price through trading, a tariff lowers the price of imports and generates a terms of trade benefit.”
How is this possible? How does it lower the price of imports?
In: 0
It may force suppliers (exporters) to reduce the price in order to maintain demand. If the tariff is for goods that have high price elasticity of demand and the tariff imposing country is a major buyer of that good.
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