Suppose that Congress imposes a tariff on
imported autos to protect the U.S. auto industry
CHAPTER 9 application: international trade 189
• A tariff—a tax on imports—moves a market
closer to the equilibrium that would exist without
trade and, therefore, reduces the gains from
trade. Although domestic producers are better
off and the government raises revenue, the losses
to consumers exceed these gains.
• There are various arguments for restricting trade:
protecting jobs, defending national security,
helping infant industries, preventing unfair
competition, and responding to foreign trade
restrictions. Although some of these arguments
have some merit in some cases, economists
believe that free trade is usually the better policy.