Tariffs, WTO, IMF and World Bank

Governments intervene in trade with tariffs (taxes on imports), quotas (quantity limits) and non-tariff barriers (standards, licences, subsidies). A tariff raises the domestic price, helping producers and the government but hurting consumers; for a small country the net effect is a deadweight loss, while a large country may also gain by improving its terms of trade (the optimum tariff argument). The WTO, IMF and World Bank govern the system: the WTO sets trade rules, the IMF lends to countries in balance-of-payments trouble, and the World Bank lends for development. Worked example: world price 100, tariff 20% gives a domestic price of 120; if domestic demand at 120 is 80 units and domestic supply is 50, imports are 30 and tariff revenue is 20 x 30 = 600.