This paper examines the profit-shifting motive of a government trade policy and investigates the effects of vertical structures and tariffs when markets are characterized by Cournot oligopolies. I also analyze the impact of competition on the price and output decisions of upstream producers. The direct impact of a tariff in the upstream sector of the market is to increase the price of the input which indirectly lowers domestic final good production and thus, welfare. In particular I show that vertical integration affects the direction in which the domestic country aims to switch trade flows by import tariffs. When foreign firms are vertically integrated downstream tariffs harm domestic input producers by lowering both the input price and output. However, under non-integration a tariff on the final good increases the domestic and foreign input supply. Increased competition in the upstream market has two effects. First, it decreases the price at which the input is traded. Second, it also lowers the output of each domestic intermediate good producer. Under intense competition in the upstream sector a tariff on intermediate good imports lowers output
