Not all trade restrictions are created equally

There has been great focus in the recent trade theory literature on the introduction
of firm heterogeneity into trade models. This introduction has highlighted the
importance of the entry/exit decision of firms in response to changes in trade barriers.
However, it is typical in many of these models to use iceberg transport costs as a general
form of trade barriers that can be interchangeable with ad valorem tariffs. I show
that this is not always an appropriate conclusion. Specifically, I illustrate that profit
for an exporter is more elastic in response to tariffs than iceberg transport costs, which
has implications for total product variety. One such implication is the possibility for
there to be an anti-variety effect associated with lower transport costs while there also
being a pro-variety effect associated with lower tariffs.