Question

How can tariffs lead to a situation in which all parties to a trade lose?

Answer 1

tariffs are tax on imports or exports. due to tariffs, all parties to a trade loses. for example if there is a tariff on buying liquors from europe. then prices of europe liquors will rise. now, due to higher prices other country's customer will purchase less amount of liquor from europe. so, europe is losing customer and profit as well. now, those who are purchasing liquor from europe have to pay higher prices. so, imposition of tariffs reduces the consumer surplus of customers that are buying liquor from europe,

so, tariffs lead to a situation in which all parties to a trade lose.