[Tadpole9181]

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.

[chiefalchemist]

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.

[wickedsight]

> 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.

[chiefalchemist]

> The answer is massive economic growth and improvements in quality of live.

Where? Here in the USA? Hint: No. The point is, those gains elsewhere have come at the cost of the US middle class.

We don’t have who we have in the WH, we don’t have the federal debt we have because globalization has been good for the US. Full stop.

p.s. We can get into USA citizens being down graded to consumers, some other time. But that’s not a positive either.

[westmeal]

But why would the manufacturer or distributor lower their margins? Charity?

[potato3732842]

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.

[trevi]

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.

[closewith]

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.

[somenameforme]

As of 2016 (first search result) 90% of food/beverage is domestically produced = no tariffs. [1] The big goal with the tariffs, outside of gaining leverage on other countries, is to motivate domestic production and alternatives. Without tariffs it simply isn't realistically possible to compete in many industries because other countries have cheaper labor and less costly regulations.

Of course the practical problem with this playing out in increased domestic production is that it's reasonably likely that in 2028 the tariffs will get rolled back, and any company that was depending on them to survive will die. That's a large amount of uncertainty for any industry where there's a significant income investment required to get going.

[1] - https://www.ers.usda.gov/data-products/charts-of-note/chart-...

[closewith]

Domestic food supply is still subject to tariffs because many of the inputs are. Agricultural machinery, parts, chemical feedstocks.

Not to mention that tariffs on directly imported goods reduce the lowest earners' ability to pay for domestic products.

If the goal was onshoring too benefit the population, it would be coupled with a strong wealth redistribution to the least wealthy to allow them to buy domestic goods. But that's not the goal.

[tart-lemonade]

>90% of food/beverage is domestically produced = no tariffs

That's not true, even for items which undergo relatively little processing like milk:

1. Cows need feed, and in the US this is mostly corn. This corn is mechanically harvested, shucked, and transported.

2. Cows are milked by machine.

3. This milk is then transported to a larger processing facility where it gets filtered, clarified (fat removal for 2%, skim, etc), pasteurized, homogenized (fat is evenly dispersed), and bottled in a blown plastic jug.

4. After bottling, the milk gets palletized and trucked to grocery distribution centers, which will re-palletize it for shipment to individual stores.

At every step of the way, we use machines that require frequent maintenance and whose supply chains rely extensively on imported parts. On-shoring all of this would be expensive and risky both because Trump flip-flops so often and because our next administration may just reverse the tariffs.

[Joeri]

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.

[Paul_Clayton]

"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 ).

[NekkoDroid]

> fear of reprisals from Trump

Realistically, what's he gonna do? Shut down the company, which he oh so desperatly wants in the US? Tax them more, driving their cost up more?

[ModernMech]

For starters, he could do what he did with CBS: threaten a potential merger. Or he could do what he did with Musk: threaten to revoke citizenship of the CEO or anyone on the board if they're foreign. Or do what he did with Harvard and Columbia: threaten to pull grants and revoke foreign visas of workers. Or do what he did with big law firms: threaten to pull security clearances.

Lots of options.

[DrillShopper]

He's already weaponized the IRS, DOJ, and FTC, so there are a lot of ways he can fuck you for not bending the knee.

[actionfromafar]

Realistically, many companies are going to shut themselves down because their margins will be gone.

[Tryk]

US != The World.

This analysis fails to realise that there are simply other countries with which to trade with.

[Gareth321]

> 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.

[dasloop]

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.

[Gareth321]

> Why the poor and working class?

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.

[Eddy_Viscosity2]

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.

[Gareth321]

> These jobs are not going to return. 'The system' is too profitable in its current form.

The system is set up to ensure efficient allocation of capital. If it's more profitable for manufacturers to produce goods in-country, that is exactly what they will do. It's a bold claim that tariffs will have no impact whatsoever on investment and spending, because it's clear that they absolutely will.

[mindslight]

At best there are going to be a bunch of new bonded warehouses built, so that distributors don't have to front the cost (and uncertainty) of the new import taxes until they have customer cash in hand. Appropriately-implemented tariffs could have kept American industry here if implemented 2-3 decades ago. At this point it's closing the barn door after the horse left, started a new life, and watched his foals grow up and have their own families. The horse is not coming back.

Far too many people think of markets as some kind of magical supercomputational system. They're really just a heuristic that does avoid some spectacular failure modes, but easily gets stuck in local maximums. China did the work over decades to prime the pump so that industry picked up and moved, while our "leaders" facilitated the looting. One pathetic man throwing policy tantrums for spectacle isn't going to reverse these now-entrenched dynamics.

There is also the glaring issue that Chinese companies can just as easily set up factories in other countries with low US tariffs. They won't be paying import taxes on the equipment they bring there to do so (like setting up a factory in the US would require), and in fact they will probably receive favors from those countries' governments for the investment. So these ham-fisted import taxes actually encourage the expansion of Chinese influence into other countries.

[notahacker]

> 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...

[Gareth321]

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.

Luxury items are price elastic. https://www.investopedia.com/ask/answers/040715/which-factor...

[notahacker]

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...

see also: https://www.investopedia.com/ask/answers/012915/what-effect-...

[Gareth321]

I don't think I agree. Luxury goods are typically defined as both income and price elastic in economics textbooks. I agree that brands can and do employ various marketing strategies like exclusivity, as you describe. This is also true of low elasticity goods like Liquid Death selling expensive water. Still, in a competitive market where the wealthy can choose other designer brands with similar class projection and quality, theory tells us that customers can and do switch, and the market finds a price equilibrium close to the pre-tariff price.