ort. The duty which we are now supposing must not be
what is termed a protecting duty, that is, a duty sufficiently high to
induce us to produce the article at home. If it had this effect, it
would destroy entirely the trade both in cloth and in linen, and both
countries would lose the whole of the advantage which they previously
gained by exchanging those commodities with one another. We suppose a
duty which might diminish the consumption of the article, but which
would not prevent us from continuing to import, as before, whatever
linen we did consume.

The equilibrium of trade would be disturbed if the imposition of the tax
diminished in the slightest degree the quantity of linen consumed. For,
as the tax is levied at our own custom-house, the German exporter only
receives the same price as formerly, though the English consumer pays a
higher one. If, therefore, there be any diminution of the quantity
bought, although a larger sum of money may be actually laid out in the
article, a smaller one will be due from England to Germany: this sum
will no longer be an equivalent for the sum due from Germany to England
for cloth, the balance therefore must be paid in money. Prices will fall
in Germany, and rise in England; linen will fall in the German market;
cloth will rise in the English. The Germans will pay higher price for
cloth, and will have smaller money incomes to buy it with; while the
English will obtain linen cheaper, that is, its price will exceed what
it previously was by less than the amount of the duty, while their means
of purchasing it will be increased by the increase of their money
incomes.

If the imposition of the tax does not diminish the demand, it will leave
the trade exactly as it was before. We shall import as much, and export
as much; the whole of the tax will be paid out of our own pockets.

But the imposition of a tax on a commodity, almost always diminishes the
demand more or less; and it can never, or scarcely ever increase the
demand. It may, therefore, be laid down as a principle, that a tax on
imported commodities, when it really operates as a tax, and not as a
prohibition, either total or partial, almost always falls in part upon
the foreigners who consume our goods: and that this is a mode in which a
nation may be almost sure of appropriating to itself, at the expense of
foreigners, a larger share than would otherwise belong to it of the
increase in the general productiveness of the labour