Ineconomics, the Lerner paradox is the theoretical possibility that imposing tariffs raises the world price of the import good, causing a deterioration of the tariff-imposing country's terms of trade.[1][2] Abba Lerner showed the possibility in his 1936 article.[3]
In the large country case of a perfectly competitive market, imposing tariffs reduces the world price of the import good, improving the tariff-imposing country's terms of trade. However, under certain conditions, tariffs can have an opposite effect. Therefore, it is called a paradox.
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