Abstract
What is a country's optimal trade policy when embargoes and other trade interruptions are threatening? In addressing this issue, the paper emphasizes the nature of adjustment impediments when an effective embargo forces the economy to alter its production pattern abruptly. A production subsidy on the imported good represents the optimal policy choice, a tariff being a second-best instrument. The tariff's superiority to free trade implies, in turn, that the conventional classification of the national defense tariff as a noneconomic argument is inappropriate since economic efficiency criteria alone can justify the tariff.
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