Normally, when a tariff is imposed, the terms of trade improve and gain accrues to the imposing country. But the tariff rate should be within a limit. If excessive tariff is imposed total gain resulting from improved terms of trade will not be large enough due to decline in the volume of trade. Hence, the question arises as to what should be the ideal rate of tariff? In this regard economists have devised the concept of 'optimum tariff.' The optimum tariff is one which maximises imposing country's gain or welfare from trade.