An optimum -- or optimal -- tariff is a tax designed for maximizing the welfare of a country. Optimum tariffs are found in international trade.
Tariffs are taxes levied by a country and charged for sales internationally. They increase the country’s overall income. Other countries often retaliate by also charging an optimum tariff.
Only large countries use optimum tariffs and benefit from them. Small countries with small economies do not have optimum tariffs. The tariff in this case is considered zero. Large countries using optimum tariffs, however, are considered to have a positive tariff because of the effect on trade.
While these tariffs were designed to increase a country’s wealth, a common effect is a decrease in demand for products offered by the country.
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