A tariff on an imported good creates winners and losers. When the U.S.

government imposes a tariff on an imported good, U.S. producers of the good gain.

U.S. consumers of the good lose.

U.S. consumers lose more than U.S. producers gain.

U.S. Producers of the Good Gain Because the price of an imported T-shirt rises by the tariff, U.S. T-shirt producers are now able to sell their T-shirts for a higher price—the world price plus the tariff. As the price of a T-shirt rises, U.S. producers increase the quantity supplied. Because the marginal cost of producing a T-shirt in the United States is less than the higher price of all the T-shirts sold, except for the marginal T-shirt, producer surplus increases. This increase in producer surplus is the gain to U.S.

producers.