Economics Trade Barriers Questions
Trade diversion refers to the redirection of trade from a more efficient or lower-cost source to a less efficient or higher-cost source due to the implementation of trade barriers. This occurs when a country, instead of importing goods from a more competitive foreign producer, starts importing them from a less competitive domestic producer or from another country that is protected by trade barriers. Trade diversion can result in higher prices for consumers, reduced efficiency, and a loss of economic welfare.