Optimal Tariffs
Nuno Limão , ( 2 )
New Palgrave Dictionary of Economics, ed. by Steven N. Durlauf and Lawrence E. Blume, Palgrave Macmillan

Optimal tariffs allow a country to exploit its market power in international trade. A country can improve its terms of trade by unilaterally restricting its exports if it faces a downward-sloping demand for them or restricting its imports if it faces an upward-sloping foreign export supply. This argument against unilateral free trade is over 150 years old but it remains central to modern theories that explain trade agreements and their rules.

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