This paper examines theoretically the structure of optimal (Nash equilibrium) tariff rates under retaliation in a two-country economy with more than two traded goods. We provide a condition under which the equilibrium tariff rates become uniform in both countries, and explore the ranking of the...

This paper considers a two-country, three-good economy in which one country imposes tariffs on import goods at a uniform rate, while the other country engages in free trade. In such an economy, we examine the welfare effects of changing tariff rates toward differential tariffs from uniform tariffs