Chapter 30 Estimating the effects of trade policy This chapter examines the way imperfect competition affects the gains and losses from trade policies. It focuses on empirical models that estimate the impact of trade policies with minimum structure imposed on the data. The welfare effects of trade policy under imperfect competition are decomposed into four possible channels: (1) a deadweight loss from distorting consumption and production decisions; (2) a possible gain from improving the terms of trade; (3) a gain or loss because of changes in the scale of firms; and (4) a gain or loss from shifting profits among countries. The chapter focuses on the concept of deadweight losses and discusses the terms of trade along with considering tariffs. It also reviews import quotas and their effect on product quality. In many industries quotas have led to an increase in the quality of imports purchased which is an optimal response by consumers and firms. The chapter discusses the effects of trade policy on the markups of firms and thereby on their output and profits. It also reviews the evidence linking import competition wages and the employment for the United States and discusses the impact of changes in product variety.