In the general equilibrium graph with a production-possibilities frontier (PPF) and consumer indifference curves,

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A tariff reduces real income because it increases the price of imported goods, which reduces the purchasing power of consumers. It also reduces the gains from exchange because it distorts the market, leading to a misallocation of resources. While protection may shift the PPF outward by promoting domestic production, it ultimately reduces consumer welfare due to the higher prices and reduced choice. A subsidy to the import-competing industry would have a different impact and depends on the specifics of the situation, such as the size of the subsidy and the elasticity of demand. Similarly, a prohibitive tariff would have different effects, as it would eliminate all imports and create a closed economy with no gains from trade.

In the General Equilibrium Graph with a Production-Possibilities Frontier (PPF)