Suppose, for example, that a tariff is proposed for the stated purpose of inducing American consumers to buy a certain domestic product in preference to cheaper foreign products, thereby protecting or encouraging the domestic industry. (Typically in such cases, it is claimed that the tariff will save domestic "jobs." This claim is somewhat misleading, however, since what people really seek, as we have already noted, is not jobs per se but rather earnings and purchasing power; cf. p. 4.4:23.) In praxeology, of course, we are principally concerned with the policy's real effects rather than its avowed purpose. What will be the actual effects of the tariff?

If the tariff alters the buying habits of consumers as intended, then the protected industry in the United States will receive x additional dollars in revenue, while its foreign competitors lose y dollars in revenue. Because the decreased domestic supply increases the product's market price, aggregate market demand will diminish. Consequently, the domestic revenue gain will be less than the loss of revenue to the foreign producers; that is, x < y.