Countries A and $B$ have infinitely elastic export supplies for a particular good, with A being the low$-$cost producer. Country $C$ is a small importing country. Country $C$ initially has a non$-$discriminatory tariff on imports from both A and B$.$ In this initial equilibrium, country $C$ imports $1,000$ units and the price in country $C$ is $80.$

Subsequently, countries B and C agree to free trade, but country $C$ continues to levy the same original tariff on country $A.$

Which of the following is true?

The agreement results in trade diversion, but there is no trade creation, reducing social welfare.

The agreement results in both trade creation and trade diversion, reducing social welfare.

The agreement results in trade creation, but there is no trade diversion, increasing social welfare.

The agreement results in both trade creation and trade diversion, increasing social welfare.