Transport costs have been somewhat neglected in international trade theory, most of which is expounded on the assumption that transport costs are absent. In this paper I shall present a simple geometric method for describing transport costs in offer-curve diagrams, and apply this method to consider the effects of transport costs on the terms of trade, the transfer problem, the optimum tariff, and real factor returns.To avoid introducing a third industry—the transport industry—it will be necessary to employ a drastic, but very useful assumption regarding the nature of transport costs. I shall assume that transport costs are met by the wastage of a proportion of the goods traded. This assumption will mean that: if each country provides the resources for transporting its own exports, then only a proportion of the goods exported will be received as imports by the other country, the remainder being used up as costs of transport; if each country provides the resources for transporting its imports, then a proportion of its exports will be used up for every unit of the other country's good imported; and if each country shares in the transport of each good, some of each country's resources will be used up in transporting each good. The meaning of this assumption will become clearer later in the paper.