tariff diagram

• before the tariff was imposed (step 1)

  The world price is P1.

  Domestic demand is Q2.

  Domestic output is Q1.

  Imports are Q2-Q1.

  
• what happens when.a tariff imposed (stage 2)

  A tariff of T will shift the world supply curve and world price upwards from P1 to P2.

  
• After the tariff is imposed (step 3)

  New world price of P2.

  Domestic consumption falls from Q2 to Q4.

  Domestic production rise from Q1 to Q3.

  Imports fall from Q2-Q1 to Q4-Q3.

  
• net welfare effect After the tariff is imposed (stage 4)

  Consumer surplus reduced by area ABCD

  Domestic producer surplus increases by area A

  Tax (tariff) revenue to the government is area C

  
• After the tariff's imposed (stage 5) net welfare


  Consumer surplus= - A-B-C-D

  Domestic producer surplus= +A

  Tax (tariff) revenue to government = +C

  Net welfare loss= B + D