I taught my first year students the effects of an import tariff in a small open economy. I used the standard diagram (from Mankiw, Kneebone and McKenzie). It looks like this:
If Canada imposes a tariff t on imported bananas, the Canadian price will rise to Pw+t. Canadian production will rise to Q2, Canadian consumption will fall to Q3, and imports will fall to Q3-Q2.
The tariff will cause a loss in consumer surplus of the red trapezoid, a gain in producer surplus of the green trapezoid, and a gain in government tariff revenue of the blue rectangle. Subtracting the gains from the losses leaves a net welfare loss of the two black triangles. Therefore import tariffs are a Bad Thing. Standard stuff.
A bright student came up to me after class. He said "Hang on prof. When you taught us taxes, last week, there was also a net welfare loss triangle. But you said the government needs tax revenue to buy stuff. And you said that the benefits of $1 of government spending might exceed $1. And if so those extra benefits of government spending might be bigger than the net welfare loss triangle. Which might mean taxes are a Good Thing. Couldn't we use the same argument to say that an import tariff could be a Good Thing too?"
He was right, of course. We could. And if import tariffs were the only source of government revenue, they would be a Good Thing.
If we want to argue that import tariffs are a Bad Thing, we need to argue that import tariffs are worse than other taxes. Here's a simple diagram that shows they are worse:
The price paid by Canadian consumers rises to Pw+t, and their consumption drops from Q4 to Q3, and the loss in consumer surplus is the red trapezoid. As far as Canadian banana consumers are concerned, there is no difference between a tax and a tariff.
One big difference between a tax and a tariff is that the tax has no effect on Canadian banana producers. They continue to get a price of Pw (net of tax), and so continue to produce Q1, exactly the same as under free trade.
The second big difference is that the Canadian government gets more tax revenue with a tax than with an import tariff. The blue rectangle in the tax diagram is bigger than the blue rectangle in the tariff diagram.
Which leads to the third big difference. The tariff created two net welfare loss black triangles. The tax only creates one net welfare loss black triangle.
The tax generates more tax revenue for a smaller net welfare loss than the tariff. Compared to a tariff, the tax is a Good Thing. Compared to the tax, the import tariff is a Bad Thing.