Tariffs are commonly employed as policy instruments to protect domestic industries and influence trade balances; however, their effects vary considerably depending on the underlying market structure. This research examines how tariffs function across various competitive environments, including perfect competition, monopoly, and oligopoly under the Cournot and Bertrand models, and analyzes who ultimately bears the burden, whether it is consumers, domestic producers, or foreign exporters. The study further evaluates the welfare implications of tariffs by examining their impact on consumer surplus, producer surplus, and government revenue. Additionally, it examines the broader macroeconomic impacts of tariffs on key indicators, including Gross Domestic Product (GDP), the Consumer Price Index (CPI), and employment. To complement the theoretical analysis, the research incorporates real-world case studies that illustrate how actual outcomes align with or deviate from model-based predictions. Beyond theory, the research also explores the Free Trade Agreement between Canada, the USA, and Mexico, and briefly discusses the 2025 tariffs imposed by the USA on various countries.
Dhruv Popli (2025) studied this question.