Optimal Taris with Inframarginal Exporters

This paper shows that an importing country can have an incentive to impose a tari to extract rents earned by foreign exporters even in a perfectly competitive setting. To demonstrate this, I develop a new model of international trade that incorporates xed costs of exporting and rm heterogeneity within a perfectly competitive framework. In this setting, despite the fact that there are no pre-existing distortions, the optimal tari is positive even for a small country with no world market power. In the limit, as either rm heterogeneity or the xed costs of exporting vanish, the optimal tari approaches zero. JEL Classi cation: F13