In economics, the Metzler paradox (named after the American economist Lloyd Metzler) is the theoretical possibility that the imposition of a tariff on

import An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited ...

s may reduce the relative internal price of that good. It was proposed by Lloyd Metzler in 1949 upon examination of tariffs within the

Heckscher–Ohlin model The Heckscher–Ohlin model (, H–O model) is a general equilibrium mathematical model of international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics. It builds on David Ricardo's theory of comparat ...

. The paradox has roughly the same status as

immiserizing growth Immiserizing growth is a theoretical situation first proposed by Jagdish Bhagwati, in 1958, where economic growth could result in a country being worse off than before the growth. If growth is heavily export based it might lead to a fall in the ter ...

and a transfer that makes the recipient worse off. The strange result could occur if the exporting country's

offer curve In economics and particularly in international trade, an offer curve shows the quantity of one type of product that an agent will export ("offer") for each quantity of another type of product that it imports. The offer curve was first derived by ...

is very inelastic. In this case, the tariff lowers the duty-free cost of the price of the import by such a great degree that the effect of the improvement of the tariff-imposing countries' terms of trade on relative prices exceeds the amount of the tariff. Such a tariff would not protect the industry competing with the imported goods. It is deemed to be unlikely in practice.Krugman and Obstfeld (2003), p. 113

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