Large-Country Tariffs and Small-Country Export Subsidies

A "large" country has the ability to affect world prices. If a tariff reduces a large country's imports, then its exporting partner has no choice but to sell less. Less demand results in a lower world price of the product. This "terms of trade gain" can benefit the importer at the expense of the other country, and can offset (or even exceed) any efficiency losses.
Subsidies, rather than being money taken by the government to reduce import demand, are money given by the government to increase export supply. This also leads to efficiency losses by exceeding the market-determined quantity of exports. The costs to the government can also be graphed in our models.