A tariff disrupts the workings of the law of one price because tariffs:

Question

Quizplus · Accepted Answer

Tariffs are taxes on imports and can vary across products and countries. The law of one price states that in the absence of trade barriers, identical goods in different countries should have the same price. Tariffs disrupt this principle by raising the cost of imported goods, making them more expensive than domestically produced goods, and creating price differences across countries for similar products.

A Tariff Disrupts the Workings of the Law of One