An Anti-Protectionist Parable

Lexington sketches out the folly of tariffs:

If tariffs are such a good economic idea, then why stop at national boundaries? If they make everyone richer, why not have customs posts between New York and New Jersey? Cars entering and leaving the Lincoln tunnel would have to pay, on top of the toll, a surcharge on all the goods they contain. Why not, indeed, make New York and New Jersey self-sufficient in all their needs, making all their own cars, growing all their own food etc?

Let us imagine that such a scheme was proposed by a future Governor Paterson or Corzine, as a wizard wheeze for boosting tax revenues. Is it just possible that such a system would discourage trade between the two states, raise costs to consumers, result in massive inefficiencies etc etc?