The effects: having been a victim of teargas myself, the most direct translation it can have into mechanical effects is a stats nerf. Your perception should be lowered to almost nil. Induce burn wounds in the eyes? Perhaps slow you down (think of when you try to charge through a boulder or open a manhole) and make your speech slurred/jagged. Many possibilities to implement with currently existing mechanisms.
The balance: tear gas shouldn't have an immediate effect. It should give you a 5-10 seconds headstart to notice the smoke and to disperse. Effectively this would be a tool to disperse crowds and catch those who aren't "aware enough" (I'm looking at you, idlers). Also, implementing a gas mask object and adding protective functionality to already existing items such as Xo3, Xo5, and WJF helmets.
And finally, make it reliant on the explosives skill! Add another use to the marginal skillset to increase its value among players.