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In class we discussed the “terms of trade” argument for a country’s imposition of a tariff....

In class we discussed the “terms of trade” argument for a country’s imposition of a tariff. What kinds of countries can (in theory at least) use a tariff to improve national welfare in this manner?

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Answer) Terms of trade refers to the ratio of price of export with respect to the price of inoort. Generally, an imposition of tariff improves the term of trade of a large nation. As the tariff discourages import and promote domestic production in the nation.

With the imposition of tariff, the nation is able to safeguard the domestic indust. The tariff also helps in reducing current account deficit along with the government revenue generation.

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