you are correct. this is exactly what’s happening with Canada and Mexico.
why do it? purely speculative, but there’s some convincing evidence that he’s a Russian
assholeasset and is attempting to weaken the US.The dumbest thing Democrats did was not referring to tariffs as an Import Tax. A tax you pay to import the goods.
Harris/Walz referred to tariffs as a tax over and over again. None of his supporters listened or cared.
Many of them could have been personally taken to dinner by a nobel winning economist and would have still have shouted “fake news!” when they were told how tariffs work.
I mean, I wouldn’t say it is the dumbest thing, but it sure is up there.
The goal is to incentivise American manufacturing. Off shoring has hurt Americans a lot. Tariffs are supposed to help that
Consider for a moment that the largest industrial import is crude oil, accounting for 164 billion dollars in 2023 [1].
Slapping a tariff on imports sounds good in theory, but domestic production is not currently capable of supplying an equivalent amount of oil. Ramping up production to that scale takes a long time, and imports are going to be necessary in the meantime.
So, what happens when an X% import tax is introduced? Gasoline refineries pay X% more and pass the cost down to the consumer by raising prices at least X%.
In the short term, this is going to fuck the average American. And unless America fights hard against non-renewable energy and EVs, it’s also going to fuck America in the long run by investing in the production of something with (ideally) dwindling demand.
And that’s just oil/gas. There’s a lot more raw materials that are difficult and/or expensive to extract domestically but cheap to obtain through global trade.
[1] https://www.census.gov/foreign-trade/Press-Release/ft900/final_2023.pdf
No, not really.
That logic only holds if american consumers have infinite money, which they dont. You cant just raise the prices indefinitely, eventually people just cant afford to buy the product so they dont buy it at all.
So it hurts everyone, the actual outcome is the product straight up just vaporizes off the proverbial shelves, you’re supply dries up.
For canada this heavily includes:
- Automobiles, enjoy going back to having year long + waits for getting your car you wanna buy
- oil, gas prices will skyrocket because the US has its own supply, so people will still buy it but yeah, prices will just go sky high
- Machinery, including construction equipment, refinery equipment, turbines, etc etc. So this will result in massively hiked up city level taxes as your local power plants, processing plants, etc find their repairs skyrocket in costs. Also potentially a lot of refineries and plants will no longer be able to afford operating costs so they’ll just shut down, so unemployment will skyrocket
- Medication, Im sure you see where that one ends up going…
- Aircraft and Spacecraft
I don’t know how the US thinks this isn’t just shuffling money around as the primary money for this is from federal spending, so they’re literally just imposing tariffs on themselves, which is pretty stupid. Par for the course though.
Shuffling it because he can say, “I’m going to cut your taxes!” And then do so and people say yay, he did what he said he was going to do, then he throws on the Tariffs and it taxes everyone across the board. What that means is he was able to directly increase the taxes on the lower and middle class, and get them to vote for it. While his decreases on taxes and the tarrifs end in a net positive for the rich still.
Shift the weight onto the masses who are struggling.
Yup, lowering a progressive income tax and increasing a regressive (sales) tax. The poor get hurt much more than the rich.
Exactly. Companies and the rich usually make most of their profits off whats below the bottom line and expectations of the bottom line going up. The majority of the population, lives and breathes what is above the bottom line. Their wages, their equipment, their healthcare, 401k matches… day to day perks, everything down to the coffee quality to keep people going when you should have crashed. That’s where the cuts come from to make sure the bottom line stays positive and increasing, otherwise they would lose investors and stock buyers. So long as they keep buying, they don’t give a damn what happens above the line. Hire micromanagers if they have to, cut bonuses, make employees who would make 55k a year hourly into managers with a set 45k salary with no overtime bonuses because it falls into the loopholes that a certain party keeps fighting to leave open.
Tariffs aren’t charged to the country or corporation the product came from. They are charged to the importer. It’s literally a fee at customs to release the item into the country. Some companies take care of this for you if you’re buying personally from overseas. Some do not and it is more transparent
Let’s use alcohol as an example because I like scotch and some stores in the UK do and some don’t. The ones that take care of customs for me would just show me a price of 68.75£ along with a warning that the exchange rate may cause a minor shift in price. The ones that do not would show a price of 55£ along with a warning about the exchange rate and that I need to deal with customs. Customs sends me a letter when the bottles arrive in the country saying I need to pay 17.26 US Dollars (about 13.75 in British money) to clear customs.
So that’s why Trump’s Tariffs are actually a sales tax on Americans. But why are countries going to retaliate?
That’s because industry owners in affected countries are going to complain to their government about our government making their products more expensive in our country. It’s okay if you need to read that a couple times, I did when I was learning about international economics. This is going to affect the trade balance between the two countries if they don’t retaliate. It will make American goods cheaper and thus give them an advantage on the world stage because they always have a protected market at home to profit from.
This is especially disastrous when the countries are dissimilar in size. Like the US and UK. Take two producers of Soybeans. In the US they have twice the available production capacity (arable fields) and a protected market six times the size of the UK by population. So if the UK producer can only sell at market rate to 60 million people and the American producer can sell at market rate to 330 million people, the American producer can make more money before we even talk about international markets. So the American company has more money than the UK company to operate internationally.
Between the two countries specifically this means that without retaliatory tariffs the American company could even buyout or bankrupt the British company and replace it in British stores, without hiring British workers. That’s an extremely important point in an economic system based on selling your labor. And why the workers will also demand retaliation.
I could keep going, there’s a lot that goes into this but at the end of the day everyone’s economy gets hurt. And the biggest thing to know is that there are two giant weak points in a trade war. Being a manufacturing country that exports a lot of stuff, (Mexico), and being a food importer, (USA). You’ll notice I didn’t mention China. That’s because they import food mostly from Africa and export goods to Russia, Europe, and the rest of Asia. Our tariffs are not going to meaningfully hurt them. As far as Mexico, you may be thinking we’ll just tariff their manufactured goods, but not their food. Well, let me introduce you to Exit Tariffs. They can make their food more expensive only in the US as a retaliation. Is that a bit self harming? Yeah, but what’s worse? Less income or Less food?
And that’s why Trump can’t possibly win his Trade War.
Yes. Theoretically, affected companies could move manufacturing onshore, but that takes years of planning, so realistically, won’t happen.
Why? When all you know is a hammer…
When all you know is a hammer…
You begin dancing eratically with flashy vinyl pants that sparkle?
HAMMER! DON’T HURT EM!!!
When all you know is a hammer…
…you can’t touch this
Seeing questions like this is so scary that so many people don’t get that simple concept.
Seeing stuff like this is mind blowing: https://youtube.com/shorts/bf3sLnZ0S04
Tariffs is just a fancy name for tax that you pay if you buy something from another country. The producers in that country already got paid, you pay that tax when the product is crossing the border.
Higher prices incentivises alternative suppliers.
If you apply blanket tariffs, the only alternative suppliers are domestic, and the current reality is that domestic production of all affected goods is either severely lacking or literally impossible.
There isn’t a magic phrase that makes it possible for farmers to grow lettuce under 2 feet of snow, unfortunately.
I aint here to defend the tariffs, just provide some basic economic literacy. If alternative suppliers arent possible, why arent they charging more already?
If alternative suppliers arent possible, why arent they charging more already?
In the context of blanket import tariffs, the alternative to foreign suppliers are domestic suppliers, and it does already happen. For example, produce prices fluctuate depending on whether the produce is “in season” or not. If something can’t be sourced locally or the local supply is reduced, the grocery store charges you more for it because of the additional costs in sourcing it from elsewhere.
Food aside, adding tariffs to everything imported is intended to disincentivize importing goods over domestic production. When demand exceeds domestic supply (and it will*), importing is still going to be necessary to meet that demand. This happens all throughout the supply chain, too. The only difference between now and then is that right now the consumer isn’t paying a bonus fee for those imported goods or the imported raw materials used to create them.
*There is not a single industrialized country that is entirely self-sufficient and without imports.
Okay, that’s not how tariffs work, a tariff is just a tax on a foreign good that american companies have to pay when they bring that good into the country.
Let’s say that a vacuum cleaner costs 100 dollars, a 25% tariff is a 25% tax that the company that brings that vacuum cleaner into the country has to pay. That company still wants to make a profit, so they raise the price by 25 dollars.
It’s american companies that pay tariffs, and that extra cost gets passed on to the consumer. The reasoning behind it is that as foreign goods become more expensive consumers will want to buy more american made products. (This is a huge oversimplification)
So yes it does hurt american consumers, and it will make stuff more expensive. Most actual experts say that these tariffs make no sense economically.
However, Trump wants the tariffs because they look good politically, and he’s willing to make things more expensive if it means people will vote for him.
TLDR: Tariffs will make stuff more expensive, but they’re popular.
They’ll want to make the same profit margin (if they aren’t changing the way they do business) so if the margin is 10% the price would go up 27.5 dollars in your example.
Wait, is my math right?
That company still wants to make a profit, so they raise the price by 25 dollars.
Or they raise the price by $40, do stock buybacks, lay off 10% of their workforce, close underperforming stores, and book their CEO on CNBC to squeal about “organized retail theft,” and pay record bonuses to the execs.
Actually if that company really wants to make money, they raise the price by $10000000000
You also just explained the last few years of inflation.
We spent a year forcibly shutting down small businesses and printing new money. That easily explains the inflation.
Bad bot
Tarrifs are paid by the importer and cost passed on to the consumer. The idea is to make it comparatively cheaper to buy local and reduce dependency on China. The problem with it is that other countries will impose tarrifs on US exports as well so a lot of people will lose their jobs and prices go up but it will increase local manufacturing jobs on the other hand.
Generally speaking people are better off when there are no tarrifs
It will increase automated manufacturing. We manufacture about 3 times as much stuff today in the US as we did in 1970. The problem is that we are doing it with 1/1000 the workforce. It will add very few jobs, just a lot more robots.
Very few is key here. The robots have to come from somewhere so those people win. A lot of those types of robots are bespoke for the location and even if they also have tariffs on getting them it’s an upfront cost and will be only paid once so there is a huge difference between a single purchase, and sourcing product or material for your own manufacturing or sale
Robots will need maintenence so theres some jobs production jobs converted to maintenence, and that will be better for those specific jobs, but not to everyone else
The tariffs will be paid by the importing companies, and then it will cause the prices of those goods to rise.
The hope is that this will incentivize and result in more development of the American manufacturing sector, resulting in medium and long term gains.
Short term there will definitely be a cost, paid by us.
We can do that without import taxes. I deride Biden’s CHIPs act as a giveaway to billionaires but it is certainly going to cause chip manufacturers to move their operations to the US instead of China. While I’m not excited about more low wage jobs, I’m less excited about import taxes that codify domestic monopolies and often cost jobs.
How do you figure it would cost jobs? Just less economic activity over all? Importing business just can’t do business any more and goes under? That will definitely happen in some places, if those companies are just barely hanging on.
Long term the cost will also be paid by us. Prices won’t go down when we start producing locally.
The expected benefits don’t include prices going down. They include:
- overall purchasing power going up
- more military independence
- more political independence
- staying ahead in the AI race
- more Americans get to spend their days building things
How is it expected for purchasing power to go up if prices increase and wages do not?
It’s expected that wages will, as more US stays within the US economy.
Compared to importing for 30% extra? The only reason that would happen is some mass market collusion. The prices will go higher, then manufacturing picks up locally, driving prices down, lower than it was previously - since you don’t need to ferry them across an ocean. Foreign goods would be 30% more expensive.
At least that’s the theory / how it is supposed to work. In reality, probably a shitton of issues, a new great depression and not much more manufacturing potential as a result. There will be tarrifs on the US too, needlessly closing off trade both ways.
True. There will likely be retaliatory tariffs hurting our exports too. But our exports are smaller than our imports currently, so currently it doesn’t hurt us as much.
Your first paragraph assumes that labour costs are the same in both markets and that there is little development or tooling cost to setting up that manufacturing base locally. Both are false, and both of those are really the reason overseas manufacturing is a thing in the first place.
Depends on what you are manufacturing. Making shit with mills, CNC, lathes, injection molding? That’s not a problem. CMM, EDM and very precise CNC? Yeah, that needs a machine with a high upfront cost. It all depends on if you are able to get customers and if you have the raw resources / the raw resources don’t price you out of existence. Overseas manufacture is worth it because it used to be cheap labor costs. You had to fix a lot of things, but it was still cheaper than making it 100% in house. Then China started becomming less competetive and it still was cheaper, but barely. Add onto it a 30% tarrif and the entire equation changes.
Again, it probably will be painful. But we will have to see.
The hope is that this will incentivize and result in more development of the American manufacturing sector
Tariffs alone are not enough. Expanding production is a long term investment, but there’s no guarantee a tariff will still exist in 4 years. Its risky to invest capital to meet tariff-induced demand when that demand might disappear before your new factory is even finished being built.
Uncle Sam can mitigate that risk by subsidizing the construction of new factories while the tariffs are in place.
According to this video, Biden maintained at least some of the targeted tariffs Trump put in place before. So there might be some bipartisan support for tariffs across multiple Presidencies.
Unfamiliar with this channel so I can’t vouch for accuracy.
Just to add, I work with this stuff all day as a Licensed Customs Broker. The US already has a lot of low tariffs (duties) on a huge range of goods. There are also a lot of free trade agreements in place that reduce or eliminate these tariffs if certain requirements can be met. The first round of tariffs on China are still around, tons of products from China already have 25% duty on top of the ‘normal’ duty rate for a said product.
I am curious what mechanism they will use to try and impose the tariffs quickly - there are only certain legal ways to do this and they take time and some need Congressional approval and investigations.
Youre got the right conclusion, wrong start.
Tariffs are taxes paid by the company doing the importing, not the country.
If my company buys shirts from Canada, its not the canadians that pay that tax, its my company. And you can bet your ass im raising my prices.
It’s not that it also hurt americans, it Only hurt americans… and maybe one or another country that really rely on american imports…like china
You mean that rely on exports to America?
Yes it will absolutely raise virtually all consumer prices, across the board. Some more than others.
Tariffs are not meant to be a stimulator of your own economy, they are a more so a test of it’s endurance. Let me explain.
Globalism is a double edged sword. We collectively came to the agreement to put it on every country themselves to figure out what they’re good at and how they can survive on the global market. It got us as far as we are today. A country can specialize creating a product from the most available resources within it’s borders be it natural resources or skilled/unskilled labor. Having access to the global market means way higher profits than just selling to your own people.
The problem with globalism is that it is completely unregulated by an overseeing entity, and since recent times have shown that hostile territorial takeovers are generally frowned upon, every country is essentially stuck with the resources it already got. This means some countries have lucked out and have more resources available than others and are therefore a bigger economic power. Generally the more complex the product your country is exporting is, the higher the state of development your country has. A lot of countries struggle to build a complex industries to meet global demands (see Korea with stem cell reasearch in the 90s and 2000s).
So if territorial takeovers are a no no, then economical takeovers are the peaceful alternative. The problem is that China has the most amount of manpower in the world, it isn’t exactly a small country either and therefore has a lot of natural resources. If China was a culturally open and peacefull democracy, this wouldn’t be an issue, but as we all know - it isn’t. If China decides to take over a market - they can. Additionally the have always been ‘rules for thee, not for me’, China buys up other countries property and land but doesn’t allow others to do the same for it.
Yes, in the end, everybody profits from the efficiency of globalism and open trade but the scales are not evenly tipped for all. This leaves most countries vulnerable to economic attacks from bigger global players. Tariffs are in a way a bargaining chip in the global market. The idea behind it is to say ‘I’ll take my business else where’ in the hope that being a big enough importer that jumps ship, would be enough to damage the tariffed countries economy. It’s essentially an economic attack from the bottom up.
An additional reason for US tariffs being bad is that it will weaken their relationship with China, and will turn China even more towards Russia, which is presumably the whole purpose given Trumps ties to Putin. All in all the next 4 years are going to be difficult for everybody.
