1. Tariff, general equilibrium
We consider the situation for a country faced with the production possibility frontier as drawn in the figure below.
small X Y
pworld
At the given world price pworld it would produce at point Q* and trade at world prices to consume at point C*
ppf Q* U* C*

2. Tariff, general equilibrium
If the country imposes a tariff, t, on its import good (good X) this rotates the price line for domestic producers clockwise to pworld(1+t) X Y
pworld
pworld(1+t) Q*
They will start to produce at point Q2 Q2 C* U*

3. Tariff, general equilibrium
Despite the tariff the country can still trade with ROW at the price pworld X Y
pworld
pworld(1+t)
So the income available to the economy is represented by an income line parallel to the initial income line through the new production point Q* Q2 C* U*

4. Tariff, general equilibrium
Consumers, like producers, face the price pworld(1+t) X Y
They equalize the marginal rate of substitution with the distorted price line along the new income line; a point like C2
pworld
pworld(1+t) Q*
The difference in production and consumption income (domestic prices) represents
tariff revenue Q2
We assume that this is redistributed lump-sum to the consumers C* C2 U* U2

5. Tariff, general equilibrium
Tariffs result in a double distortion. First, producers change production and thus income. X Y
pworld
pworld(1+t)
Welfare U1 at point C1 is still attainable.
Second, consumers are
also confronted with distorted prices, which lowers welfare to U2 Q* Q2 C* C2 C1 U* U1 U2

6. Tariff, general equilibrium
Here is an enlargement of the welfare loss arising from the tariff
First, the production (income) loss
Second, the consumption loss
Check for yourself that the second loss does not arise if a production subsidy is given, rather than a tariff imposed. C2 C* C1 U* U2 U1