Including tariffs. (Blanket) tariffs are almost like a special tax on poor people.
Explanation: to a well off person, 25% higher gas or food prices is just an annoyance. Nothing in their day to day life will change because of that. To a poor person it's brutal.
And, importantly, tariffs are payed by the importing party. This means they affect the base price of the product and cannot be made progressive.
You could set up a deduction system... But that's retroactive (poor people still don't have that money for a whole year) and dramatically complicates their tax filing burden and financial record keeping requirements.
The rich can afford lawyers and accountants, so the IRS has been going after lower and lower income folk for their slip-ups more often. So yet more punishing the poor.
And, importantly, tariffs are payed by the importing party. This means they affect the base price of the product and cannot be made progressive
Yes. But that cost can be absorbed across the board. The manufacturer can lower their margins. The importer / distributor / wholesaler can do the same. The B2B / B2C seller can do the same.
It doesn’t all necessarily get directly passed to the buyer.
Another question that few are asking is: what has the off shoring of so much manufacturing cost the USA? Looking at the resident of the WH, it appears to be quite a bit.
> Another question that few are asking is: what has the off shoring of so much manufacturing cost the USA? Looking at the resident of the WH, it appears to be quite a bit.
A question that I see ignored by people who ask your question, is 'what has off-shoring brought the US?' The answer is massive economic growth and improvements in quality of live.
Off-shoring allows you to make stuff cheaper by keeping the economic circumstances of the creator worse than your own. We can get cheap stuff from China because they work many more hours than people in the west do and they live in conditions that are much worse. Because we can get cheap stuff (like pocket computers, clothing, shoes, couches, cars and more) and off-shore most of the downsides (pollution, long working hours, dangerous workplaces), we improve our quality of life significantly.
So unless you prefer working in mines or working 80 hours a week in a dirty, dangerous factory, I think you're probably better off with globalization than you would've been without.
They wouldn't on purpose but I can tell you from experience that what happens in practice is that you don't re-quote everything or instantly change your quoted pricing based on a small fluctuations in inputs. So most companies will eat a couple percent (gross) margin here and there. So when an input cost rises margins my go to X-1, and then X-2 as it it rises more, then someone notices and changes quoted pricing to say Y+1, 2 or 3 depending on whether you're trying to get ahead of future hikes, how bad you're being squeezed, how bad you want more work, etc. But no matter what the "area under the curve" of all this change is almost always going to be negative. Sure, there's the occasional winner but in total the entire industry and economy loses.
Price elasticity of demand (=sensitivity to price changes). If the seller is afraid that higher prices will significantly impact sales (people won't buy the product or buy alternatives), it might accept a lower margin in order to maintain the volume.
Also market competition can be a factor: if competitors are not raising prices (or by smaller amounts), you might lose market share.
The drop in demand for staples you're talking about is quite literally the poorest people eating less, using fewer basics, lowering their quality of life further.
In the short term: fear of reprisals from Trump, as he clearly warned them not to raise prices. In the long term markets find a new equilibrium, as they always do when a new tax is imposed, and that is probably going to be a combination of lower margins, higher prices for the consumer and lower prices for foreign suppliers.
"higher prices for the consumer" can include lower value at the same price. Size reduction seems a common method for certain commodities. This may result in reduced consumption (e.g., a consumer buying one package of ice cream every other week), as well as increase customer dissatisfaction when the change is noticed, and it can increase packaging cost per unit weight/volume.
Other ways of reducing value are possible such as reducing quality control effort, reducing quality of inputs, and reducing manufacturing costs in ways that are known to reduce product quality.
Pushing costs to effectively underregulated externalities can also avoid price increases.
It is also sometimes possible to increase efficiency. Even a long term commodity can have potential for efficiency improvements that were considered not worth exploring under stable pricing pressures. (I suspect value reduction is easier and much faster than efficiency improvement.)
Sadly, reducing value can have a disproportionate cost to consumers. Reducing manufacturing costs for a Watchman's boots by 20% may reduce the lifetime of such by 30% and reduce the quality of use by 50% (which may be related to Samuel Vimes' theory: https://en.m.wikipedia.org/wiki/Boots_theory ).
> And, importantly, tariffs are payed by the importing party. This means they affect the base price of the product and cannot be made progressive.
This is not correct. The cost of tariffs are shared by the distributor and customer. The proportion is determined by the elasticity of demand. By this I mean that for goods and services which people rely on, like gas, they will pay almost all of the cost of the tariff because they need the gas to survive. For luxury goods and services, like Louboutin shoes, most of the cost of tariffs is paid by the distributor. This is because customers are willing to substitute for other options, or simply not buy that item. They don't need it.
The downstream effects are quite complex to calculate. For this reason, neoliberals prefer to avoid any tariffs at all. For example, the U.S. is a net gas exporter, meaning that total net local consumption can be satisfied without imports. In a perfect market, there would be no change to the cost of gas. However gas is a commodity, and there is the risk that cartels abuse their market positions to exploit the fact that locals must buy gas from them if they wish to avoid the tariff. For other goods like imported food, locals can substitute. They don't have to buy imported avocados. There are plenty of other affordable and nutritious foods available locally. However, the loss of avocados is, by some metric, a loss of quality of life. This isn't generally captured in economic data. Further still, some of these additional costs are offset by the fact that local businesses become more profitable thanks to said tariffs, and this ends up in the pockets of consumers. Because so much menial labour is currently offshored, the primary benefactor of tariffs is expected to be the poor and working classes.
Why the poor and working class? Increasing benefits on local products maybe will, maybe not, move to salaries. But first necessity goods are not very elastic making that products more expensive.
Because by and large, most of the jobs offshored by the U.S. have been lower skilled. As these jobs return, it is the lower skilled workers who will primarily benefit.
I agree that there are likely examples of necessities which cannot be produced cost effectively locally which will become more expensive.
These jobs are not going to return. 'The system' is too profitable in its current form. What will happen is tariffs will cause prices to rise as companies pass on this tax to consumers (which is inflationary). In fact, they may go up more than that, same way as they did during covid. Even if say two years from now a new congress and senate remove these tariffs. The prices will not go down. Companies will not build new factories here because it is easier, after they get the new higher prices locked in, to just lobby to get the tariffs removed and then keep the difference as sweet sweet margin.
> Because so much menial labour is currently offshored, the primary benefactor of tariffs is expected to be the poor and working classes.
See, I was with you until this (OK, mostly with you, luxury goods are price inelastic so the buyer definitely pays).
The primary beneficiary of a carefully designed tariff policy might be some working class people in some industries (and some wealthy owners, natch), at the expense of direct and indirect customers of those industries who may or may not be poor themselves. But an idiot imposing blanket unpredictable tariffs with promises to negotiate "great deals" that lift them in future costs far more of those manufacturing jobs than it protects, because on the one hand it creates enormous supply chain risk to US manufacturing, and on the other hand overseas companies aren't investing in building new facilities in the US because of a 40% tariff levied until the POTUS changes his mind in a few months time...
That's certainly a possibility, so I agree. If the uncertainty leads to significantly lower investment over a prolonged period of time, the benefits could be offset.
Strictly speaking luxury goods are income elastic (by definition) but can be either price elastic or inelastic at different points on the pricing curve, with profit-maximising suppliers attempting to set prices at the level where it reaches unitary elasticity. But when we're talking about designer brands (as opposed to the strict economic definition of a 'luxury good' which encompasses most of the shoe market), they typically price above that level anyway to maintain "exclusivity". Hermes made a point of publicly stating that it would pass on 100% of tariffs costs to consumers, and whilst I haven't tracked Louboutin shoe prices I doubt their customer base for shoes costing 10x their less fashionable equivalent is going to permanently refuse to pay a 15% price increase. Particularly not when it also applies to the brand's closest competitor in the form of other trendy European designer shoe brands. I suspect the tariff-eating that occurs in the US fashion market will tend to be US-based retailers cutting their margins rather than the foreign brand cutting its wholesale prices too...
Not a great example since energy and food are overwhelming domestically produced in the US. That doesnt mean there is no effect of tariffs in those categories, but it is much more muted than the headline numbers might suggest.
In the middle of last century you saw the opposite where the lower you went on the income distribution the faster your income was increasing, relativy speaking.
The middle of last century saw a labour shortage and much weaker monopsony labor makret ibfluence so that makes sense. The title of this article should be "in a surprise to noone, jobs that can be done by the widest percentage of the population are highly competitive and least responsive to wage pressure"
> True, since they own all the beachfront property
Climate change does not mean just rising sea levels, but more extreme weather as well, which can include more flooding: warmer air holds more moisture, so when it eventually gets released it can be in downpours. See recent flooding in Texas.
Poor people tend to live in the highest risk areas because the safer areas are desired most and so the people with money bid up prices there.
When you hear headlines like "Trailer Park Destroyed by Tornado", and people ask "Who would live in 'Tornado Alley'?", the answer is "Poor people.".
Regarding people living in Tornado Alley because they can't afford to live anywhere else, insurance costs are much higher there, so not exactly a bargain. And plenty of wealthy people love high risk areas. Pretty much anything by a sea is high risk. And again, they pay for it with higher insurance rates.
It's hard to get a good measure of damage caused by climate change. There are much touted statistics that say billion dollar weather events are more common than ever, but that's mainly due to things being more expensive and increased development (i.e. beach front properties)
A more objective measure, although no perfect, is deaths caused by climate events. If climate events were more catastrophic over time, you would expect deaths to go up somewhat proportionally. To my knowledge, there haven't been major advances in rescue technology in the last 50 years or so.
But we see this number has come down pretty drastically over the last 150 years. In the US it has also come down or stayed about the same
Not if you own your trailer without a mortgage. If you have a mortgage you're pretty much required to have insurance. Not getting insurance doesn't make this cheaper really as you'll just lose your property completely every few years. Besides insurance rates are often highly subsidized by federal government and actually a really good bargain
Explanation: to a well off person, 25% higher gas or food prices is just an annoyance. Nothing in their day to day life will change because of that. To a poor person it's brutal.