That’s the point. It’s not crazy. Tariffs are regressive taxes. Rich people buy more stuff, sure, but as a percentage of their income they net out as beneficiaries of shifting taxes from income to spending. It’s totally rational if you want to increase taxes on the bottom 80% to subsidize the top 20% (and especially top 5%).
Personally I can understand tariffs on high end goods but taxes on low-end goods or raw materials is insane.
Any country doing it has hobbled it's industry for decades and some might prove that they don't work even if you keep these tariffs on for centuries...
But politicians will politic what can we do huh... Really feels like no side, opinion or thought of every day folks matters anywhere.
I believe it was MIT that ran a study a couple of decades ago that proved that people were unable to influence policy through voting because the effectiveness of lobbying put the vote inputs below the noise floor?
Haven't watched them (yet), but I don't think it's because of the electronic side of things, but more the closed source, black-box nature of the specific devices. It would be possible to design a reasonably secure, open source voting system that would allow voters to validate their votes.
Which matches the rest of the seeming plutocratic moves afoot in the past 6 months.
Taking huge chunks out of American opportunism (defunding science, health care, education, space, and so much else), blowing a huge chunk out of social welfare programs: that's going to cause amazing downgrades for most people. Paths to success closed, cost of getting by vastly higher. (All while walking over all over habeus corpus, while collecting & colating data of everyone in the homeland, while building concentration camps and tossing random hairdressers in international terrorism dungeons; denigrating the population generally, humiliating basic rights of man.)
But the plutocratic class doesn't really notice the change. The Global Elite E1 Barbarian class (of Michael O Church 3 ladders) doesn't notice or care. They stay about the same, but the sinking tide leaves many other boats grounded.
It sure seems like there's an international conspiracy of the very wealthy to screw over the land of opportunity right now. And there's 219+53 people in congess and two in the White House happily helping aid and abet this pushing opporunity off the cliff.
Fits perfectly hand in glove with the Network State ideology (which seeks to make who you know and what connections you've gathered define your environment) and the Christofascist ideology (which says religion should rule), both of which resent government as it is, which are part of the broader long campaign to "starve the beast". But to regionalize this situation to the US feels like it misses how the real nature of the E1 Global Barbarian Elite's desire to make clear their ascent over all others.
The EU's faces are more visible than Westminster's, and their powers much much weaker.
There's a sliding scale from "free trade agreement" to "country", and the EU is closer to the former than the latter even with the Euro and Schengen (neither of which perfectly matches the EU).
value added taxes are paid on the profit made on the good, and are paid by the seller (because the buyer doesn't know what the profit is). value added taxes are basically corporate income taxes
Here in the UK, the value added tax (VAT) is calculated from the sales price to the customer. Companies can claim back VAT that they pay for parts etc so that VAT is pretty much only paid by the customer
> A tariff as you might recall is punitive for the ultra rich people
If by 'ultra rich people' you mean the owners of capital, then no, not really. Those businesses hurt by tariffs will almost always raise prices until they are at least breaking even, otherwise they couldn't survive.
Yes, such business might lose some sales, so their 'ultra rich' owners might end up slightly less 'ultra rich', but don't forget that there will also be other businesses that will very much benefit from the tariffs (because market prices will go up when any part of the market is hit with tariffs), so their owners will become more wealthy.
So to sum up, with tariffs:
* some businesses may be hurt
* some businesses may be helped
* government gets more tax revenue
* consumers get higher prices
The 'ultra rich' don't care if food, clothing, cars, etc cost 5 or 10 or 20 percent more because they already have way more disposable income than they need. And even if they do take a hit, going from an annual income of $1M to $500k is not nearly as bad as going from $50k to $40k.
Apart from hurting some businesses and helping others, tariffs are no different than a regressive tax increase.
To be fair, the portion of the tariffs passed on to the consumer is a regressive tax. The portion of the tariff that is covered by the American companies is more complicated and probably goes mostly against the wealthy. (Then, of course, there’s the portion of the tariffs, covered by the foreign companies, which is article is saying it’s not a large portion.) There is hope the consumer is not completely screwed. We will have to see how it turns out. (I am not a fan of tariffs or the administration, but I am ok with people who are.)
Considering the US deficit a consumer tax is probably a good idea.
But ofcourse in their infinite wisdom the Republicans use the money for tax cuts for the rich...
> The tariffs are paid by the foreign producers, not consumers.
The tariffs are being paid by domestic companies, not foreign producers. There is literally no way for a foreign producer to pay a U.S. tariff as the tariff is charged to the importer before the good is released by Customs.
The impacts of the tariffs are domestic. If consumer prices are not increased, then profits, investment, or expenses (including salary, benefits, etc) will be decreased. The money has to come from somewhere inside the U.S.
This is the entire point of a tariff, historically and as expressed by this administration. It is not to source foreign tax revenue, it is to create intentional domestic pain as a means toward implementing a top-down industrial policy. “Make it here or I will hurt you” is the overt message from the President.
> The tariffs are being paid by domestic companies, not foreign producers.
I've had suppliers from China lower their prices in the face of the tarrifs so that the total amount I pay after the tarrifs is only slightly higher. Which is going to be even more harmful if/when the tarrifs get removed as they're now undercutting American manufacturers even more than they were before.
And if those hints become reality, might prices rise to re-increase margins?
Do you make the same argument about the corporate income tax being absorbed by companies? Or do you assume that tax makes its way to consumers through price increases? What about increases in the minimum wage?
Dude, I write the checks, I assure you: the importer pays, no one else. I import the stuff, I pay at the port, I get my stuff. Now I take my wildly expensive stuff back to my building and try to stay in business. Whatever macro economic stories might be playing out, it starts with an American business paying a fat tax to get his materials.
> Core CPI continues to print lower than street expectations, for five consecutive months now. Far lower than what the Fed is concerned about, and certainly leagues lower than what the consumer expects.
Haven't a ton of the tariffs been delayed? To what extent have they actually been in effect?
Everyone focusing on consumer prices. But tariffs also function to incentivize domestic reindustrialization, which has huge national security implications. You see this clearly in the venture space as increased investment interest in hardtech and manufacturing. It's great that the federal government is looking long term again.
No one is risking multi-year commitments of millions or billions of dollars to build a factory in America when the tariffs change week to week.
If you want to incentive domestic reindustrialization, you do it with things like the Inflation Reduction Act, CHIPS act or the "Green New Deal" where congress lays out clear sets of rules in law with a mixture of tax incentives, loan programs and spending to give investors and corporations confidence to make decade-long commitments of capital to major projects.
The problem is now it will be very hard to convince anyone to ever be confident that they can ever make decade-long commitments to anything, because anything laid out in law might be upended by a president who doesn't care about the law, aided and abetted by courts and legislators who also don't care.
We're going to need a deep reckoning with some foundational concepts of governance to dig our way out of this.
There was a pretty good NYT Daily interview with a small manufacturer on the 14th of April this year, "Her Business Was Thriving. Then Came the Tariffs". The business owner outlines a lot of "on the ground" issues around the tariffs & building in America (including looking at building the factory to build their products themselves).
I don't know anything particular about the others, but Apple has been investing at least that much in increasing US production for many years now, and Chobani, AFAIK, has never had significant non-US facilities (and started in NYS—in fact, its first plant is less than 20 minutes' drive from where I work).
Given that, I question how many of these are actually caused by the tariffs.
> Given that, I question how many of these are actually caused by the tariffs.
For automotive and electronics, a lot of it was a result of CHIPS and IRA related subsidizes
That said, the tariffs do help incentivize domestic production instead of taking advantage of subsidizes from CHIPS+IRA and then comingling with SKUs from abroad.
Think of the Biden-era CHIPS+IRA as the carrot, and the Trump associated tariffs and export controls as the stick.
For every failed attempt like Wisconsin, you have equally successful industrial policies like Arizona and Texas in semiconductors. They are also Republican states like WI, but had better managed industrial policy teams.
A lot of the investments listed by OP were also thanks to CHIPS and IRA, but the tariffs have acted as the stick to force the Capex realized from CHIPS and IRA remains in the US.
Even China has been leveraging a similar strategy to force it's own manufacturers like BYD and CATL or foreign manufacturers like Foxconn to keep bleeding edge manufacturing within China by using a mix of export controls and revoking passports of Chinese nationals abroad.
> TSMC’s
That was Foxconn, not TSMC.
Also, Foxconn is an assembler, not a high value manufacturer.
You incentivize domestic industrialization by actually doing that (but it's hard and takes planning). In fact uncertainty about tariffs make investment less likely (and more expensive, because you have to buy equipment and steel, and copper at 50% tariffs).
So no, you don't get re-industrialization, you get stagflation. It's idiocracy.
An N95 mask made in China costs $0.30. One made in the USA costs $1.00. A 25% tariff was enacted by executive fiat. The made in China mask is still cheaper than the USA made one. Few hospitals buy American. PPE manufacturers in Malaysia win.
It's clear that a 25% tariff isn't enough in this example.
It's very basic though. Americans have to follow laws, including regulations from EPA, OSHA, building codes, routine inspections (e.g. health inspections), and taxes and permits.
External companies don't face as many of these hurdles. Mexico doesn't have to report to the EPA or OSHA, so if implementing better work environments or cleaner air is important, tariffs act as a tax to instead manufacture in America and, in effect, follow those regulations.
Yes off-shore manufacturers have lower labor and environmental standards. Wealthy countries indirectly benefit from exploitation.
You'd have to somehow convince or force hospitals to pay more for disposable medical supplies. They're not going to pick the USA made mask when they can get a Malaysian one. Domestic manufacturers are only going to build new plants and hire with a long term policy shift.
Americans would be pissed once everything triples in price.
and China is therefore punished in the context of treating US imports to China in an unfair way; this was one of the goals, so you're saying "policy win"?
Very telling that you think "punishing" China is a win for us. We are mostly just fucking ourselves, proving that we can't be trusted as a global trading partner, and driving other countries straight into China's arms.
If we only tariffed China, yes. They would be. Because while their 37.5¢ mask remains 63% cheaper than the American one, it might be 20% more expensive than one made in Mexico or India or Vietnam. But we didn't do that. We raised the prices for everyone. So those orders are, more likely than not, still going to go to China. There will just be some middle men taking a cut along the way.
With the planet-smashing asteroid sized caveat that all these businesses are way harder to start when trying to procure machines and materials and other CapEx is all faces massive tariffs.
Maybe those folks can be competitive within the US given the absurd tariffs. But will they be competitive on any global scale, with those additional headwinds? And if TACO or years pass and tariffs get rescinded, having that massive extra overhead on CapEx is not a good position to be in.
Most manufacturers rely on a global supply chain. Therefore tariffs raise costs for US manufacturers, actually making them less competitive internationally.
But don't worry, the falling dollar will compensate.
have you followed the news? it's been reported that after the period of changing tariffs, agreements have been reached for more US manufacturing, said agreements providing the certainty you are seeking.
> agreements have been reached for more US manufacturing
Simple answer is we won't know for another year or two. These [1] are analogous to bookings. They could be bona fide. Or they could be DOGE figures. (We already know the project at the top of the list is being massively scaled back [2].)
Taking a step back, there is currently zero signal in FDI [3][4].
They said "planning accordingly", not "will have an easy painless time"?
When my flight home from Stansted to Berlin was cancelled, and the replacement, and the airline's next free seat wasn't for another week, I definitely both planned accordingly *and* complained hard.
I'm not willing to believe this was the plan while the tariffs also apply to crops we can't reasonably grow in the US, like cocoa and coffee. And the tariffs are also single across-the-board numbers for each country. And were originally based on trade deficits with the countries (unless we had a trade surplus with a country, in which case it was 10% anyway).
tariffs that apply to crops we don't grow in the US still discourage purchase of those crops, making the sellers unhappy. if the seller country has been putting tariffs on US goods, the seller country is now incented to bargain on the tariffs in both directions. I'm not saying this is a good idea, but explaining something you have not accounted as a reason.
> tariffs also function to incentivize domestic reindustrialization
The problem is nobody in D.C. has a strategy for tariffs.
Either America is facing unfair international competitive barriers, in which case the tariffs are punitive and to be negotiated away. Or America is erecting permanent trade barriers, in which case there aren't trade negotiations because that would compromise the long-term investment thesis for re-shoring projects.
Tariffs alone are unlikely to have any effect on re-industrialization. In fact if not properly implemented it will have a negative effect.
North Africa had high tariffs on cars for decades. That didn’t create a car industry. But when, a few years ago, Morocco decided to get serious they made changes that last year they manufactured almost as much as Italy.
The irony of the situation is that tariffs can work to make domestic industry more competitive, if they are applied strategically and backed by focused industrial policy.
China's dominance of the EV market is a recent case in point. China went from having approximately zero percent of the EV market in 2008 to completely dominating by the end of 2024 with an end to end vertically integrated EV manufacturing capability and a definite technological edge in some of the most critical areas. It took a decade plus of stringent protection for the fledgling EV industry and a couple of hundred billion dollars in subsidies, but they have ensured their dominance of the EV industry for a generation at the very least.
The US on the other hard, applied tariffs in an indiscriminate, chaotic manner(no one sane is going to invest anything when US policy depends on the whim of the president) and applied it even to raw materials which our remaining industries desperately need.
Also, instead of creating sound industrial policy, we seem to be hell bent on destroying the very foundations of US dominance in many industries by actively attacking science and technology in the country, from gutting scientifically focused agencies to waging a vicious war on universities and foreign students.
All of this for what? To add 5 trillion to our debt by passing a tax cut that predominantly benefits corporations and billionaires? To make the MAGA base feel good about making life miserable for 'the others'? This truly feels like the beginning of the end for the American empire or even the American experiment.
You can never count out the American capability for reinvention, but at some point, patches and refactorings stop working and you need a rewrite.
there are so many second order effects here who knows. for example (and im not saying this will always be the case) if a tariff pushes a foreign company's good out of the us marketplace and the customer is "forced" to pay 2x for something domestically manufactured that lasts 4x as long, did the american "pay for it"? how would this look in bulk economic data (spoiler it would look bad because consumption went down)
In this case, the economic data would indicate rising inflation. The quality of the goods purchased is mostly irrelevant, but it's quite an assumption to assume the good will last longer.
But we don’t manufacture anything here anymore. Like at all. And even if we did, would it really last 4x as long as a foreign manufactured item? And would it only cost 2x?
This isn’t remotely true, the United States is the second largest manufacturing nation by value [1]. And manufacturing is still the dominant industry in many regions of the US. We might not be great at making consumer goods, but consumer goods is only a small subset of all manufacturing.
A reminder, most tariffs will not be paid because consumers will just shift their spending habits to match or just buy less.
Tariffs are a double edged sword because the hurt purchasing power of consumers without really generating much money for the government.
The administration is going to focus on the fact that tariffs don't really drive inflation, but are going to miss the forest for the trees: prices won't go up because we all have become a little poorer.
>without really generating much money for the government
it's been reported that tariff collections have soared to the point that the budgeted spending is no longer in the red. this article is written in a confusing way, but your statement "not generating much money for the govt" appears to be incorrect
> tariff collections have soared to the point that the budgeted spending is no longer in the red
"The federal government ran a monthly surplus of $26 billion in June. However, this was because government payments typically due June 1 shifted into May this year as June 1 fell on a weekend. Accounting for this timing shift, the government ran a monthly deficit of $71 billion" [1].
Tariffs have brought in like $55bn in extra revenue to date [2]. One would expect that to decrease as trade deals are negotiated and consumers shift behaviour.
The real double-edged sword is that tariffs can be both recessionary and inflationary. Consumers cutting spending habits will slow the economy and trigger layoffs, which in turn will continue slowing the economy. On the flip side, we still import most of our goods because we don't have an industrial base sizable enough–and likely won't for several decades—so those tariffs will drive prices up. It's a positive feedback loop that results in a halting economy.
If the Trump admin was serious about rebuilding the industrial base, they'd be providing subsidies and federal grants, not tariffs. They'd also be sucking money out of the economy by increasing the number and top marginal rates on the income tax and patching loopholes in the corporate tax code. At the same time, they'd be cutting taxes for the bottom 80% of America and providing healthcare and childcare subsidies.
The oversimplified (and naive) response has been that prices will go up, but the shift to domestic production and consumption will in turn increase household incomes, and that will (hand-wavingly) balance out.
Do you have any resources for other solutions for improving American manufacturing capability? I'm ignorant to most of this but I'm interested in what solutions people have proposed.
You generally need to subsidize too, and if you look at the real industrial powerhouses like China or Germany you'll see deep government involvement in things like "ensuring super cheap energy for industry" and "removing red tape" that we're not really tackling.
Usually to bring big existing companies back either by choice or kicking and screaming about being weaned off unsustainably cheap labour...
As for new companies, other than the valley or DoD contracts what's new? Electric cars which aren't popular in a country that doesn't apply tax at the pump.
Here's a thing with a punitive tariff on it. People won't buy it because the price went up too much. It is because prices went up that nobody buys it. (And we all become poorer because we can afford less, whether or not the price increase shows up in the inflation statistics.)
Tariffs have their own Laffer Curve just like income taxes do. Sure, you can set them so that the government gets zero (or close) revenue. But you don't have to. You can set them so that the government gets quite a bit of money. (Note well: I am not claiming that Trump is setting them there.)
That this is surprising to a large group of Americans speaks to how uneducated a lot of them are. Not sure if it has something to do with the underfunded school system?
Red states are red states for a reason. Lowest income, lowest educational attainment, rural poverty and struggling schools.
It’s a pernicious problem exacerbated by conservative media that’s 24 hour xenophobia and jingoism. It’s not just the US look to your countrymen dear reader!
It's very frustrating to city dwellers that so much of the "discourse" on the right is how immigrants are destroying cities, mass transit is a death trap, etc. And it's aimed squarely at rural voters.
It is a tax on businesses who import things right? Basically exactly the same as corporate income tax, which Trump cut in his first term.
Now the tax is being raised on companies who import goods made overseas, but companies who make their product in the US don’t have to pay the tax.
If you are usually the type of person that supports taxing the rich and taxing large businesses, shouldn’t tariffs be something that you generally are in favor of?
It's not as simple as "companies who make their product in the US don't have to pay the tax". Companies that import to assemble here or import raw materials to manufacture here also pay tariffs.
And no, thinking "tax the rich" is a good idea is not the same thing as thinking it's a good idea to add taxes that are passed directly to consumers. You're doing this narrative slight of hand where you are placing taxes that would successfully target the wealthy in the same bucket as ones that are easily passed on to consumers. Don't do that if you want a constructive conversation.
This only needs to be explained to Americans who are somehow still hanging on to Donald Trump's explanation of tariffs: that they are gonna make foreigners pay.
Tariffs are taxes that locals pay on stuff imported from abroad.
Not worth explaining, they exist in a different reality. One where thousands of sex trafficking victims had just two culprits, a bathroom full of classified documents was not a felony, and "find me votes" isn't a crime.
> Tariffs are taxes that locals pay on stuff imported from abroad
Importers pay the tariff. But where the tax burden falls is more complicated.
Short answer is that right now, we don't have strong evidence for where the burden is falling. Given how volatile tariffs have been, and the variety of leverage positions of American importers across industries, it will probably be years before we can suss out a signal from the data.
If an American screw driver is $10, and a Chinese one was $5, I bought Chinese.
If you tariff the Chinese one to $8, I will buy American.
China knows this, so they change the price on their screw driver (that actually costs them 0.75) accordingly, so that it can still be sold for $5, because they know there's a ceiling on what people will pay.
China doesn't have pure competition. The price of their goods isnt really related to cost by it more of what the buyer will pay.
As much as Bloomberg used to be a great business resource, it seems a bit bias now and the paywall is super annoying. However I’d still consider it a legitimate source.
I can say from my supply chain experience, which I can’t really disclose, other than to say it’s substantial in my world, I directly negotiate purchases from Asia (various regions) of between $25 million to $75 million per year.
If those statements are in conflict with my various NDAs then it was a typo.
Moving on, since the tariffs have hit, the deals I’ve negotiated have had substantial pre tariff discounts.
For example, a widget that used to cost me $219k before tariff now costs me $159k plus tariff.
My takeaway is yes, consumers are going to pay more as the post tariff price is higher than the pre tariff price. BUT the suppliers are taking haircuts, and they are getting more aggressive with eachother. The Chinese government doesn’t want to directly say they are going to further subsidize production costs in China due to American tariffs, but some of this is happening and may accelerate as demand further drops.
Just my humble opinion.
It all comes down to who has leverage. The difference is being squeezed by the US government to collect revenue. But I’d suspect not all items will have the same dynamics.
We have to see how this will play out. It is a real war albeit no rockets are flying around, for now.
American tariffs are meant to be paid by Americans, and not usually meant to damage foreign companies. A rise in the price of imports is not an unforeseen consequence of tariffs, it's their entire purpose. This is basic knowledge that everybody at Bloomberg knows. You know the tariffs are targeted well enough because Bloomberg is against them; they wouldn't care at all if they felt that the costs could be passed onto the consumer. The consumer, when confronted with high prices due to tariffs, often buys something else that is not subject to tariffs.
Grover Norquist is smiling from the grave right now, watching this bipartisan anti-tax push.
More interesting to me is how Trump has managed to multiply the effects of tariffs by creating complete chaos (either on purpose or by accident.) The tariffs never turn out to be as high as they were marketed as. They are reapplied and dropped on alternate months. He makes the ending of tariffs contingent on actual concessions on other issues that the US is concerned about, but also makes them contingent on bullshit that no one would ever agree to.
All of this is creating the stress that causes people to restructure their supply chains, manufacturing, and logistics, at first to get the flexibility to adjust when Trump veers, but they can always see the alternative of cutting out imports at all which would frees them from any of that. The drama ("uncertainty") around tariffs is in and of itself a tariff (that will be seen in prices) that isn't being collected by the government, it's going into efforts by businesses to onshore and/or diversify their vendors. That onshoring is also going to raise consumer prices until it lowers them again.
That would be the price for demanding US labor standards be used in making US products, too. If we wanted to stop depending on foreign slave labor for cheap disposable shit, I don't know how we do that without tariffs. "Free trade" is an active enemy of labor rights.
I don't think I have read anything so wrong about tariffs in quite a while.
Tariffs either protect local manufacturing and/or slows consumption of said import.
In both cases, it is inflationary.
His followers may believe that, but Trump himself is obviously aware of what a tariff is. He seems to think that he can bully importers such as Walmart into eating the cost of tariffs and not passing the cost onto the consumer, but I suspect he really doesn't care. It makes for better optics if he pretends to care about consumers, but ultimately Trump only cares about Trump, and wants to use tariffs as a way to bully other countries to make himself look good - the tough deal maker. Some of his tariff "deals", such as with UK, have been laughable, but he's happy to go along as long as he can claim victory and get good press out of it.
If selling to another country was just as profitable as selling to America (pre-tariff), they would have already been doing that. You're saying they are paying, but you're labeling paying as "not paying".
American buyers are the pretty girl, because they are in debt up to their ears and constantly taking out more. There's no secret alternative to the American market that everybody was ignoring until tariffs. Everybody else will be getting stuff cheap for a while because countries that are hit with tariffs will have too much production capacity, but those won't be profitable sales.
American buyers, however, can buy their products from anyone in the world. They can choose to buy domestically, or to import from countries that have lower tariffs.
In my trade economics textbook years ago it was stated that the cleared customs cost of an imported good is no more than 30% of its final consumer price, and more typically 10%. The rest is inland logistics, retail costs, and marketing.
Further to that, 80% of the economy is services or otherwise has nothing to do with imports. Tariffs are not affecting haircuts or yoga classes or bank fees.
Seems to me like tariffs are being used as a convenient excuse.
Right, but if you double the cleared customs cost with a 100% tariff, many of those additional costs are levied as a constant margin, which tends toward doubling the retail price.
You might argue that the retail channel can eat the difference, but it doesn't make sense to make the same absolute margin on goods that are subject to volatile tariff policies. It makes it hard to predict how many units will sell, how much stock to maintain, and creates a big risk that any units on shelves will suddenly be devalued when these tariffs are rescinded.
you can't actually argue that the retail channel will eat the difference. that would be arguing that the financial market would eat the difference, and that's exactly what financial markets will not do. nor do you want them to, since the money in financial markets is your pension.
lay people have a broken view of what goes into a price and a profit, thinking that a "fair" profit should be some "reasonable" percentage. It's just not how it works, it works on multiplied rates. the financial markets exist to give large companies working capital. if the companies need double the working capital, the shareholders/bankers want double the returns. the alternative would be you getting a letter saying "hey, the returns on your retirement account are going to be halved, think of it like your retirement account is now half the size"
It would be fine for the overall increase in markets to be much less, if you just take the gains away from, say, the top 10% and give them to everyone else.
>Right, but if you double the cleared customs cost with a 100% tariff, many of those additional costs are levied as a constant margin, which tends toward doubling the retail price.
I’m sure you can find short term examples of this, but in the long run consumer products tend towards a pretty “fair” price given the cost of retail, marketing, shipping, returns etc - all of which are things that do not anywhere near double when you pay a tariff. Your fat margins are someone else’s opportunity; walk around Walmart or Home Depot or Amazon and you won’t find a lot of fat margins. So no, you won’t double retail prices.
Just because some retailer makes 3-5% profit overall, doesn't mean that the gross margin on each product is 3-5%. It very much isn't. I've heard doubling the import cost is typical. This allows enough margin for holding stock, the warehouses, floor space, lighting, staffing, transportation, insurance, promotion, clearance, etc., which eat up most of this gross margin.
The fair price accounts for all of these costs, which are significant, even at scale.
Import taxes can affect the price of, say, yoga classes. Not direcly of course (unless maybe you're following a correspondence/video course from India where you need to buy imported tapes), but you can think of it like this:
The price of food is based on the price of domestic produce and the price of imports. If taxes are levied on food imports it will raise the mean price of food. As yoga instructors need food to do their job (in fact, they need it to live), they would have to raise their prices.
honestly, it’s a little of everything. foreign companies will eat the tariffs to some extent, consumers will shift to less tariffed goods and consumers will pay the tariffs.
however, paying the tariffs is essentially paying taxes and the government needs money and there’s nothing wrong with that. this one has the extra sword of helping our other Americans find work and increasing the likelihood that foreign goods will be purchased from allied nations and not totalitarian dictatorships with goals that might end in ww3 with the usa, while not completely cratering our economic system with full and immediate decoupling.
In the same way that laws against pumping your own gas help other Americans find work. It makes everyone else poorer instead of naturally created jobs which provide goods and services people want.
> increasing the likelihood that foreign goods will be purchased from allied nations and not totalitarian dictatorships
Citation needed, this round of tariffs have also fallen on our allies
Tariffs are just a mechanism to adjust the calculus of where something is made.
Consumers getting Nd:YAG lasers from China below cost are also weakening the laser supply chain elsewhere. Tariffs are a type of response to these situations.
"If you look at page 1 of the tariff handbook, it says: Don't tariff inputs. It's the simplest way to make it harder—more expensive—for Americans to do business. Any factory around the world can get the steel, copper, and aluminum it needs without paying a 50% upcharge, except an American factory."
It would take many years for production to meaningfully ramp up, but there absolutely is a lot of land in California that could be used to grow avocados if it made economic sense.
But those areas don't have anywhere close to the land of Brazil, Columbia or Vietnam.
--------
Another example: bauxite ore (Australia is our chief partner in that IIRC). USA somehow is missing the raw ore for Aluminum despite nearly everyone else in the world having it.
Correct, I know that coffee is grown on Hawaii, but it simply doesn't have the land area at the right altitude necessary to do so at the required scale.
Something not quite the same, but parallel is happening with Florida oranges:
> Only 12m boxes of oranges will have been produced in Florida by the end of this year (2024), ... The figure is 33% lower than a year ago, and less than 5% of the 2004 harvest of 242m boxes.
> It is also dwarfed by the 378m boxes expected to be produced this year in Brazil
Supply side economics, which aims to stimulate growth by reducing costs for industry, is jeered today as “trickle down economics”; it’s considered regressive because the benefits are concentrated for suppliers while the benefits to consumers never materialise. This policy has “failed every time it’s tried!”
Tariffs are the antithesis of supply side strategy. Yet tariffs, which increase costs for suppliers like any other tax, are derided by the same people as “regressive” as if they will always be born 100% by the consumer. Supposedly, tariffs cannot possibly benefit the working class on any time scale.
At least one of these positions must be at least partly wrong. Which is it?
Both of these can be true. Compare the US to countries like China for example, which has had success growing its economy with more state led companies and financing through state owned banks. It’s not perfect, but compared to western countries, less of the profits go to the private sector, and it allows the government to more directly chase long term strategic goals.
Does partly wrong imply they can both be partly right?
Regardless, within the current system (which is not based on theory and based on reality), we combine these elements, and neither seem to directly benefit certain industries depending on who you're looking at. If it does, these policies may not benefit everyone.
https://archive.ph/wbPDv
Crazy that one of the major policy initiatives of the all Republican/Maga government is to impose a huge consumer tax increase.
Maybe calling these "import taxes" instead of "tarrifs" would help emphasize that to the average voter?
That’s the point. It’s not crazy. Tariffs are regressive taxes. Rich people buy more stuff, sure, but as a percentage of their income they net out as beneficiaries of shifting taxes from income to spending. It’s totally rational if you want to increase taxes on the bottom 80% to subsidize the top 20% (and especially top 5%).
Personally I can understand tariffs on high end goods but taxes on low-end goods or raw materials is insane. Any country doing it has hobbled it's industry for decades and some might prove that they don't work even if you keep these tariffs on for centuries...
But politicians will politic what can we do huh... Really feels like no side, opinion or thought of every day folks matters anywhere.
I believe it was MIT that ran a study a couple of decades ago that proved that people were unable to influence policy through voting because the effectiveness of lobbying put the vote inputs below the noise floor?
Yup.
Our votes basically don't matter because our democracy is captured by lobbyists
Seems like the votes somehow matter. If Trump didn’t win there wouldn’t be tarifs right?
That's assuming that the voting machines accurately counted the votes and weren't tampered with
Tom Scott provided an excellent explanation of why electronic voting is a terrible idea.
Original: https://m.youtube.com/watch?v=w3_0x6oaDmI
Follow-up: https://m.youtube.com/watch?v=LkH2r-sNjQs
Haven't watched them (yet), but I don't think it's because of the electronic side of things, but more the closed source, black-box nature of the specific devices. It would be possible to design a reasonably secure, open source voting system that would allow voters to validate their votes.
Which matches the rest of the seeming plutocratic moves afoot in the past 6 months.
Taking huge chunks out of American opportunism (defunding science, health care, education, space, and so much else), blowing a huge chunk out of social welfare programs: that's going to cause amazing downgrades for most people. Paths to success closed, cost of getting by vastly higher. (All while walking over all over habeus corpus, while collecting & colating data of everyone in the homeland, while building concentration camps and tossing random hairdressers in international terrorism dungeons; denigrating the population generally, humiliating basic rights of man.)
But the plutocratic class doesn't really notice the change. The Global Elite E1 Barbarian class (of Michael O Church 3 ladders) doesn't notice or care. They stay about the same, but the sinking tide leaves many other boats grounded.
It sure seems like there's an international conspiracy of the very wealthy to screw over the land of opportunity right now. And there's 219+53 people in congess and two in the White House happily helping aid and abet this pushing opporunity off the cliff.
Fits perfectly hand in glove with the Network State ideology (which seeks to make who you know and what connections you've gathered define your environment) and the Christofascist ideology (which says religion should rule), both of which resent government as it is, which are part of the broader long campaign to "starve the beast". But to regionalize this situation to the US feels like it misses how the real nature of the E1 Global Barbarian Elite's desire to make clear their ascent over all others.
You're effectively saying humanity replaced monarchies with a global (often faceless) ruling class.
Yup, that's it. The analysis fits. Brexit helped push the UK on the same path.
>Brexit helped push the UK on the same path.
The EU has mastered the "global (often faceless) ruling class". No Brexit needed for that one.
The EU's faces are more visible than Westminster's, and their powers much much weaker.
There's a sliding scale from "free trade agreement" to "country", and the EU is closer to the former than the latter even with the Euro and Schengen (neither of which perfectly matches the EU).
All hail the AI algorithms
Just another xerox of europe which is just another xerox of the middle east which is just a xerox of the local minima..
> It’s totally rational if you want to increase taxes on the bottom 80% to subsidize the top 20% (and especially top 5%).
Nothing rational about plutocracies or oligarchies.
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A tariff across the board is same as a sales tax (rather a value added tax, as it is dependent on the value of goods).
I would love to understand why you think it is punitive for the ultra rich.
sales taxes are based on the value of the goods.
value added taxes are paid on the profit made on the good, and are paid by the seller (because the buyer doesn't know what the profit is). value added taxes are basically corporate income taxes
Here in the UK, the value added tax (VAT) is calculated from the sales price to the customer. Companies can claim back VAT that they pay for parts etc so that VAT is pretty much only paid by the customer
> A tariff as you might recall is punitive for the ultra rich people
If by 'ultra rich people' you mean the owners of capital, then no, not really. Those businesses hurt by tariffs will almost always raise prices until they are at least breaking even, otherwise they couldn't survive.
Yes, such business might lose some sales, so their 'ultra rich' owners might end up slightly less 'ultra rich', but don't forget that there will also be other businesses that will very much benefit from the tariffs (because market prices will go up when any part of the market is hit with tariffs), so their owners will become more wealthy.
So to sum up, with tariffs:
* some businesses may be hurt
* some businesses may be helped
* government gets more tax revenue
* consumers get higher prices
The 'ultra rich' don't care if food, clothing, cars, etc cost 5 or 10 or 20 percent more because they already have way more disposable income than they need. And even if they do take a hit, going from an annual income of $1M to $500k is not nearly as bad as going from $50k to $40k.
Apart from hurting some businesses and helping others, tariffs are no different than a regressive tax increase.
How is income tax regressive?
A flat tax would be. It's been flattening in the US.
> A flat tax would be
No. A flat tax is proportional [1].
[1] https://www.investopedia.com/ask/answers/042415/what-are-dif...
Tariff is a sales tax
To be fair, the portion of the tariffs passed on to the consumer is a regressive tax. The portion of the tariff that is covered by the American companies is more complicated and probably goes mostly against the wealthy. (Then, of course, there’s the portion of the tariffs, covered by the foreign companies, which is article is saying it’s not a large portion.) There is hope the consumer is not completely screwed. We will have to see how it turns out. (I am not a fan of tariffs or the administration, but I am ok with people who are.)
Considering the US deficit a consumer tax is probably a good idea. But ofcourse in their infinite wisdom the Republicans use the money for tax cuts for the rich...
What a country.
but there's "tax what you want less of"
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> The tariffs are paid by the foreign producers, not consumers.
The tariffs are being paid by domestic companies, not foreign producers. There is literally no way for a foreign producer to pay a U.S. tariff as the tariff is charged to the importer before the good is released by Customs.
The impacts of the tariffs are domestic. If consumer prices are not increased, then profits, investment, or expenses (including salary, benefits, etc) will be decreased. The money has to come from somewhere inside the U.S.
This is the entire point of a tariff, historically and as expressed by this administration. It is not to source foreign tax revenue, it is to create intentional domestic pain as a means toward implementing a top-down industrial policy. “Make it here or I will hurt you” is the overt message from the President.
> “Make it here or I will hurt you” is the overt message from the President.
And even the first part is largely random. The main message is just "I will hurt you, whoever you are".
> The tariffs are being paid by domestic companies, not foreign producers.
I've had suppliers from China lower their prices in the face of the tarrifs so that the total amount I pay after the tarrifs is only slightly higher. Which is going to be even more harmful if/when the tarrifs get removed as they're now undercutting American manufacturers even more than they were before.
== hints at pressure on corporate margins.==
And if those hints become reality, might prices rise to re-increase margins?
Do you make the same argument about the corporate income tax being absorbed by companies? Or do you assume that tax makes its way to consumers through price increases? What about increases in the minimum wage?
They are reality (OP says GM took a $1B hit), and no, they aren't
It’s odd how you claim this will impact foreign companies, but your only example is a US-based company.
The question was, do you believe companies will just accept lower margins or if they will eventually increase prices to re-coup those margins?
If you think they will just absorb it, would you apply the same logic to minimum wage or corporate tax increases?
Dude, I write the checks, I assure you: the importer pays, no one else. I import the stuff, I pay at the port, I get my stuff. Now I take my wildly expensive stuff back to my building and try to stay in business. Whatever macro economic stories might be playing out, it starts with an American business paying a fat tax to get his materials.
> Core CPI continues to print lower than street expectations, for five consecutive months now. Far lower than what the Fed is concerned about, and certainly leagues lower than what the consumer expects.
Haven't a ton of the tariffs been delayed? To what extent have they actually been in effect?
https://www.tradecomplianceresourcehub.com/2025/07/22/trump-...
The baseline 10% reciprocal tariff rate remains in effect for all, while many of the bigger country-specific tariffs are paused until Aug 1.
China has special tariffs that stack with that 10%: Section 301 (up to 25%) + Fentanyl tariff (20%).
In addition, worldwide tariffs impacting steel & aluminum (50%) as well as autos and auto parts (25%) are in effect.
It's kind of amazing that we forgot they're illegal to begin with.
Everyone focusing on consumer prices. But tariffs also function to incentivize domestic reindustrialization, which has huge national security implications. You see this clearly in the venture space as increased investment interest in hardtech and manufacturing. It's great that the federal government is looking long term again.
No one is risking multi-year commitments of millions or billions of dollars to build a factory in America when the tariffs change week to week.
If you want to incentive domestic reindustrialization, you do it with things like the Inflation Reduction Act, CHIPS act or the "Green New Deal" where congress lays out clear sets of rules in law with a mixture of tax incentives, loan programs and spending to give investors and corporations confidence to make decade-long commitments of capital to major projects.
The problem is now it will be very hard to convince anyone to ever be confident that they can ever make decade-long commitments to anything, because anything laid out in law might be upended by a president who doesn't care about the law, aided and abetted by courts and legislators who also don't care.
We're going to need a deep reckoning with some foundational concepts of governance to dig our way out of this.
There was a pretty good NYT Daily interview with a small manufacturer on the 14th of April this year, "Her Business Was Thriving. Then Came the Tariffs". The business owner outlines a lot of "on the ground" issues around the tariffs & building in America (including looking at building the factory to build their products themselves).
https://www.youtube.com/watch?v=v3pfM5v0F9U
They change week to week, but they're consistently an order of magnitude above where they were.
> They change week to week, but they're consistently an order of magnitude above where they were
They've about doubled [1], from $55bn to $110bn.
[1] https://www.politico.com/interactives/2025/trump-tariff-inco...
> No one is risking multi-year commitments of millions or billions of dollars to build a factory in America
Yes because of all the silicon fab plants popping up in the EU and Africa?...
>No one is risking multi-year commitments of millions or billions of dollars to build a factory in America when the tariffs change week to week.
Apple: $500M over four years including a facility in Houston opening next year
Chobani: $1.7B for new facilities in Idaho and NY
J&J: $55B over four years into new facilities, a 25% increase over previous
Honda: moving 100% of Civic hybrid hatchback production to the US
Hyundai: $25B over three years
IBM: $150B over five years
Merck: $1B for a new plant in Delaware
Nvidia: For this first time in history will be manufacturing chips in the US
Roche: $50B
TSMC: $165B
https://www.cbsnews.com/news/us-manufacturing-domestic-tarif...
I don't know anything particular about the others, but Apple has been investing at least that much in increasing US production for many years now, and Chobani, AFAIK, has never had significant non-US facilities (and started in NYS—in fact, its first plant is less than 20 minutes' drive from where I work).
Given that, I question how many of these are actually caused by the tariffs.
> Given that, I question how many of these are actually caused by the tariffs.
For automotive and electronics, a lot of it was a result of CHIPS and IRA related subsidizes
That said, the tariffs do help incentivize domestic production instead of taking advantage of subsidizes from CHIPS+IRA and then comingling with SKUs from abroad.
Think of the Biden-era CHIPS+IRA as the carrot, and the Trump associated tariffs and export controls as the stick.
We’ve already seen what TSMC’s promises of investment are actually worth, in Wisconsin.
Hedge your bets on these…
For every failed attempt like Wisconsin, you have equally successful industrial policies like Arizona and Texas in semiconductors. They are also Republican states like WI, but had better managed industrial policy teams.
A lot of the investments listed by OP were also thanks to CHIPS and IRA, but the tariffs have acted as the stick to force the Capex realized from CHIPS and IRA remains in the US.
Even China has been leveraging a similar strategy to force it's own manufacturers like BYD and CATL or foreign manufacturers like Foxconn to keep bleeding edge manufacturing within China by using a mix of export controls and revoking passports of Chinese nationals abroad.
> TSMC’s
That was Foxconn, not TSMC.
Also, Foxconn is an assembler, not a high value manufacturer.
You incentivize domestic industrialization by actually doing that (but it's hard and takes planning). In fact uncertainty about tariffs make investment less likely (and more expensive, because you have to buy equipment and steel, and copper at 50% tariffs).
So no, you don't get re-industrialization, you get stagflation. It's idiocracy.
No assuming that there is no next step is idiocracy... And also the weakness of 4yr political planning in the west.
The next step is to work around tariffs where you can and need to which forces innovation and jobs on both sides of the border.
An N95 mask made in China costs $0.30. One made in the USA costs $1.00. A 25% tariff was enacted by executive fiat. The made in China mask is still cheaper than the USA made one. Few hospitals buy American. PPE manufacturers in Malaysia win.
It's clear that a 25% tariff isn't enough in this example.
It's very basic though. Americans have to follow laws, including regulations from EPA, OSHA, building codes, routine inspections (e.g. health inspections), and taxes and permits.
External companies don't face as many of these hurdles. Mexico doesn't have to report to the EPA or OSHA, so if implementing better work environments or cleaner air is important, tariffs act as a tax to instead manufacture in America and, in effect, follow those regulations.
Yes off-shore manufacturers have lower labor and environmental standards. Wealthy countries indirectly benefit from exploitation.
You'd have to somehow convince or force hospitals to pay more for disposable medical supplies. They're not going to pick the USA made mask when they can get a Malaysian one. Domestic manufacturers are only going to build new plants and hire with a long term policy shift.
Americans would be pissed once everything triples in price.
and China is therefore punished in the context of treating US imports to China in an unfair way; this was one of the goals, so you're saying "policy win"?
Very telling that you think "punishing" China is a win for us. We are mostly just fucking ourselves, proving that we can't be trusted as a global trading partner, and driving other countries straight into China's arms.
> China is therefore punished
If we only tariffed China, yes. They would be. Because while their 37.5¢ mask remains 63% cheaper than the American one, it might be 20% more expensive than one made in Mexico or India or Vietnam. But we didn't do that. We raised the prices for everyone. So those orders are, more likely than not, still going to go to China. There will just be some middle men taking a cut along the way.
With the planet-smashing asteroid sized caveat that all these businesses are way harder to start when trying to procure machines and materials and other CapEx is all faces massive tariffs.
Maybe those folks can be competitive within the US given the absurd tariffs. But will they be competitive on any global scale, with those additional headwinds? And if TACO or years pass and tariffs get rescinded, having that massive extra overhead on CapEx is not a good position to be in.
Most manufacturers rely on a global supply chain. Therefore tariffs raise costs for US manufacturers, actually making them less competitive internationally.
But don't worry, the falling dollar will compensate.
Tariff rates have changed how many times in the past six months? Businesses need certainty if they are going to make long term investments.
have you followed the news? it's been reported that after the period of changing tariffs, agreements have been reached for more US manufacturing, said agreements providing the certainty you are seeking.
> agreements have been reached for more US manufacturing
Simple answer is we won't know for another year or two. These [1] are analogous to bookings. They could be bona fide. Or they could be DOGE figures. (We already know the project at the top of the list is being massively scaled back [2].)
Taking a step back, there is currently zero signal in FDI [3][4].
[1] https://www.whitehouse.gov/articles/2025/06/trump-effect-a-r...
[2] https://www.wsj.com/tech/ai/softbank-openai-a3dc57b4?st=7eCi...
[3] https://fred.stlouisfed.org/series/ROWFDIQ027S
[4] https://fred.stlouisfed.org/series/ROWFDNQ027S
If you believe that any agreements with Trump provide certainty, I have a bridge to sell.
The rest of the world now knows that any promise made by the US government is not worth the paper it's signed on, and is planning accordingly.
the rest of the world is complaining bitterly. they would not be doing that if their solution was as simple and painless as you like to think
They said "planning accordingly", not "will have an easy painless time"?
When my flight home from Stansted to Berlin was cancelled, and the replacement, and the airline's next free seat wasn't for another week, I definitely both planned accordingly *and* complained hard.
I'm not willing to believe this was the plan while the tariffs also apply to crops we can't reasonably grow in the US, like cocoa and coffee. And the tariffs are also single across-the-board numbers for each country. And were originally based on trade deficits with the countries (unless we had a trade surplus with a country, in which case it was 10% anyway).
tariffs that apply to crops we don't grow in the US still discourage purchase of those crops, making the sellers unhappy. if the seller country has been putting tariffs on US goods, the seller country is now incented to bargain on the tariffs in both directions. I'm not saying this is a good idea, but explaining something you have not accounted as a reason.
> tariffs also function to incentivize domestic reindustrialization
The problem is nobody in D.C. has a strategy for tariffs.
Either America is facing unfair international competitive barriers, in which case the tariffs are punitive and to be negotiated away. Or America is erecting permanent trade barriers, in which case there aren't trade negotiations because that would compromise the long-term investment thesis for re-shoring projects.
Tariffs alone are unlikely to have any effect on re-industrialization. In fact if not properly implemented it will have a negative effect.
North Africa had high tariffs on cars for decades. That didn’t create a car industry. But when, a few years ago, Morocco decided to get serious they made changes that last year they manufactured almost as much as Italy.
The irony of the situation is that tariffs can work to make domestic industry more competitive, if they are applied strategically and backed by focused industrial policy.
China's dominance of the EV market is a recent case in point. China went from having approximately zero percent of the EV market in 2008 to completely dominating by the end of 2024 with an end to end vertically integrated EV manufacturing capability and a definite technological edge in some of the most critical areas. It took a decade plus of stringent protection for the fledgling EV industry and a couple of hundred billion dollars in subsidies, but they have ensured their dominance of the EV industry for a generation at the very least.
The US on the other hard, applied tariffs in an indiscriminate, chaotic manner(no one sane is going to invest anything when US policy depends on the whim of the president) and applied it even to raw materials which our remaining industries desperately need.
Also, instead of creating sound industrial policy, we seem to be hell bent on destroying the very foundations of US dominance in many industries by actively attacking science and technology in the country, from gutting scientifically focused agencies to waging a vicious war on universities and foreign students.
All of this for what? To add 5 trillion to our debt by passing a tax cut that predominantly benefits corporations and billionaires? To make the MAGA base feel good about making life miserable for 'the others'? This truly feels like the beginning of the end for the American empire or even the American experiment.
You can never count out the American capability for reinvention, but at some point, patches and refactorings stop working and you need a rewrite.
there are so many second order effects here who knows. for example (and im not saying this will always be the case) if a tariff pushes a foreign company's good out of the us marketplace and the customer is "forced" to pay 2x for something domestically manufactured that lasts 4x as long, did the american "pay for it"? how would this look in bulk economic data (spoiler it would look bad because consumption went down)
In this case, the economic data would indicate rising inflation. The quality of the goods purchased is mostly irrelevant, but it's quite an assumption to assume the good will last longer.
> and im not saying this will always be the case
But we don’t manufacture anything here anymore. Like at all. And even if we did, would it really last 4x as long as a foreign manufactured item? And would it only cost 2x?
Manufacturing output has more than doubled in the US since 1980: https://fred.stlouisfed.org/series/IPMAN#
This isn’t remotely true, the United States is the second largest manufacturing nation by value [1]. And manufacturing is still the dominant industry in many regions of the US. We might not be great at making consumer goods, but consumer goods is only a small subset of all manufacturing.
1. https://en.wikipedia.org/wiki/Manufacturing
2x was being generous. many us made things are outpriced on say amazon by 1.25 or 1.5 even but get far fewer clicks because of the sort algorithm.
that's really not true. for example, i stopped buying shit underwear and bought made in the usa underwear and it's been great.
Where did the raw materials for this 'american' product come from?
Most raw materials can be found in the US.
If those materials weren't already advantageous to obtain domestically, this points to inevitable price increases.
A reminder, most tariffs will not be paid because consumers will just shift their spending habits to match or just buy less.
Tariffs are a double edged sword because the hurt purchasing power of consumers without really generating much money for the government.
The administration is going to focus on the fact that tariffs don't really drive inflation, but are going to miss the forest for the trees: prices won't go up because we all have become a little poorer.
>without really generating much money for the government
it's been reported that tariff collections have soared to the point that the budgeted spending is no longer in the red. this article is written in a confusing way, but your statement "not generating much money for the govt" appears to be incorrect
https://www.cnbc.com/2025/07/11/treasury-posts-unexpected-su...
> tariff collections have soared to the point that the budgeted spending is no longer in the red
"The federal government ran a monthly surplus of $26 billion in June. However, this was because government payments typically due June 1 shifted into May this year as June 1 fell on a weekend. Accounting for this timing shift, the government ran a monthly deficit of $71 billion" [1].
Tariffs have brought in like $55bn in extra revenue to date [2]. One would expect that to decrease as trade deals are negotiated and consumers shift behaviour.
[1] https://bipartisanpolicy.org/report/deficit-tracker/
[2] https://www.politico.com/interactives/2025/trump-tariff-inco...
The real double-edged sword is that tariffs can be both recessionary and inflationary. Consumers cutting spending habits will slow the economy and trigger layoffs, which in turn will continue slowing the economy. On the flip side, we still import most of our goods because we don't have an industrial base sizable enough–and likely won't for several decades—so those tariffs will drive prices up. It's a positive feedback loop that results in a halting economy.
If the Trump admin was serious about rebuilding the industrial base, they'd be providing subsidies and federal grants, not tariffs. They'd also be sucking money out of the economy by increasing the number and top marginal rates on the income tax and patching loopholes in the corporate tax code. At the same time, they'd be cutting taxes for the bottom 80% of America and providing healthcare and childcare subsidies.
The oversimplified (and naive) response has been that prices will go up, but the shift to domestic production and consumption will in turn increase household incomes, and that will (hand-wavingly) balance out.
Do you have any resources for other solutions for improving American manufacturing capability? I'm ignorant to most of this but I'm interested in what solutions people have proposed.
You generally need to subsidize too, and if you look at the real industrial powerhouses like China or Germany you'll see deep government involvement in things like "ensuring super cheap energy for industry" and "removing red tape" that we're not really tackling.
Germany… government… “removing red tape”…
Ich lach mich kaputt
(I love it here, but “removing red tape”?!)
Tariffs and tax breaks mostly.
Usually to bring big existing companies back either by choice or kicking and screaming about being weaned off unsustainably cheap labour...
As for new companies, other than the valley or DoD contracts what's new? Electric cars which aren't popular in a country that doesn't apply tax at the pump.
I don't think that's quite right.
Here's a thing with a punitive tariff on it. People won't buy it because the price went up too much. It is because prices went up that nobody buys it. (And we all become poorer because we can afford less, whether or not the price increase shows up in the inflation statistics.)
Tariffs have their own Laffer Curve just like income taxes do. Sure, you can set them so that the government gets zero (or close) revenue. But you don't have to. You can set them so that the government gets quite a bit of money. (Note well: I am not claiming that Trump is setting them there.)
I think that's correct to say it's not an on-off switch, but I am just saying that inflation should not be an expected outcome of tariffs.
Given the desire to weaken the dollar... Isn't that kind of the expected goal?
The point of tariffs is to make foreign goods (including parts) more expensive, and therefore spur a shift in production.
Not to somehow make foreign firms pay more or whatever, how would that work?
That this is surprising to a large group of Americans speaks to how uneducated a lot of them are. Not sure if it has something to do with the underfunded school system?
Red states are red states for a reason. Lowest income, lowest educational attainment, rural poverty and struggling schools.
It’s a pernicious problem exacerbated by conservative media that’s 24 hour xenophobia and jingoism. It’s not just the US look to your countrymen dear reader!
It's very frustrating to city dwellers that so much of the "discourse" on the right is how immigrants are destroying cities, mass transit is a death trap, etc. And it's aimed squarely at rural voters.
Not to mention a large portion of that cohort views education as a moral wrong.
Birds did not read Ornithology to fly. Accumulation of knowledge is useful but real world experience and hard earned wisdom is more important.
That is what you test-taking, credential hustlers do not understand.
Birds didn't read Ornithology in order to fly, sure. But you can be damn sure the engineers at Boeing cracked a textbook on the way to making the 747.
Real-world experience teaches you how you survived. Education teaches you how others failed. You need both to avoid old mistakes and make new ones.
It’s not about credential hustling, it’s about having more tools in the toolbox.
Well duh
It is a tax on businesses who import things right? Basically exactly the same as corporate income tax, which Trump cut in his first term.
Now the tax is being raised on companies who import goods made overseas, but companies who make their product in the US don’t have to pay the tax.
If you are usually the type of person that supports taxing the rich and taxing large businesses, shouldn’t tariffs be something that you generally are in favor of?
It's not as simple as "companies who make their product in the US don't have to pay the tax". Companies that import to assemble here or import raw materials to manufacture here also pay tariffs.
And no, thinking "tax the rich" is a good idea is not the same thing as thinking it's a good idea to add taxes that are passed directly to consumers. You're doing this narrative slight of hand where you are placing taxes that would successfully target the wealthy in the same bucket as ones that are easily passed on to consumers. Don't do that if you want a constructive conversation.
Right but my question is basically how is this different than any other type of corporate tax?
What is the difference between “taxes that are passed directly to consumers” and normal taxes? Don’t ALL taxes get passed to consumers?
What is different about tariffs that makes them more likely to be passed to consumers vs normal income taxes?
only if the rich do not pass the cost down to the bottom 80%
Right but isn’t that then a case against all taxes on corporations?
You could say that corporate income taxes are also bad because they will be passed on to the consumer in the exact same way a tariff is.
A tariff is just a normal tax which only applies to imported goods.
All taxes on businesses will be passed on to the consumer in the same way any expense is.
This only needs to be explained to Americans who are somehow still hanging on to Donald Trump's explanation of tariffs: that they are gonna make foreigners pay.
Tariffs are taxes that locals pay on stuff imported from abroad.
Not worth explaining, they exist in a different reality. One where thousands of sex trafficking victims had just two culprits, a bathroom full of classified documents was not a felony, and "find me votes" isn't a crime.
> Tariffs are taxes that locals pay on stuff imported from abroad
Importers pay the tariff. But where the tax burden falls is more complicated.
Short answer is that right now, we don't have strong evidence for where the burden is falling. Given how volatile tariffs have been, and the variety of leverage positions of American importers across industries, it will probably be years before we can suss out a signal from the data.
If an American screw driver is $10, and a Chinese one was $5, I bought Chinese.
If you tariff the Chinese one to $8, I will buy American.
China knows this, so they change the price on their screw driver (that actually costs them 0.75) accordingly, so that it can still be sold for $5, because they know there's a ceiling on what people will pay.
China doesn't have pure competition. The price of their goods isnt really related to cost by it more of what the buyer will pay.
As much as Bloomberg used to be a great business resource, it seems a bit bias now and the paywall is super annoying. However I’d still consider it a legitimate source.
I can say from my supply chain experience, which I can’t really disclose, other than to say it’s substantial in my world, I directly negotiate purchases from Asia (various regions) of between $25 million to $75 million per year.
If those statements are in conflict with my various NDAs then it was a typo.
Moving on, since the tariffs have hit, the deals I’ve negotiated have had substantial pre tariff discounts. For example, a widget that used to cost me $219k before tariff now costs me $159k plus tariff.
My takeaway is yes, consumers are going to pay more as the post tariff price is higher than the pre tariff price. BUT the suppliers are taking haircuts, and they are getting more aggressive with eachother. The Chinese government doesn’t want to directly say they are going to further subsidize production costs in China due to American tariffs, but some of this is happening and may accelerate as demand further drops. Just my humble opinion.
Not sure why this comment was dead when it contains an interesting perspective.
It plays on Trump’s argument that other countries are paying the tariffs and most people don’t want to admit they were wrong and Trump was right.
That being said, it’s too early to call it.
It all comes down to who has leverage. The difference is being squeezed by the US government to collect revenue. But I’d suspect not all items will have the same dynamics.
We have to see how this will play out. It is a real war albeit no rockets are flying around, for now.
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The sky is blue
Ok, but please don't post unsubstantive comments.
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American tariffs are meant to be paid by Americans, and not usually meant to damage foreign companies. A rise in the price of imports is not an unforeseen consequence of tariffs, it's their entire purpose. This is basic knowledge that everybody at Bloomberg knows. You know the tariffs are targeted well enough because Bloomberg is against them; they wouldn't care at all if they felt that the costs could be passed onto the consumer. The consumer, when confronted with high prices due to tariffs, often buys something else that is not subject to tariffs.
Grover Norquist is smiling from the grave right now, watching this bipartisan anti-tax push.
More interesting to me is how Trump has managed to multiply the effects of tariffs by creating complete chaos (either on purpose or by accident.) The tariffs never turn out to be as high as they were marketed as. They are reapplied and dropped on alternate months. He makes the ending of tariffs contingent on actual concessions on other issues that the US is concerned about, but also makes them contingent on bullshit that no one would ever agree to.
All of this is creating the stress that causes people to restructure their supply chains, manufacturing, and logistics, at first to get the flexibility to adjust when Trump veers, but they can always see the alternative of cutting out imports at all which would frees them from any of that. The drama ("uncertainty") around tariffs is in and of itself a tariff (that will be seen in prices) that isn't being collected by the government, it's going into efforts by businesses to onshore and/or diversify their vendors. That onshoring is also going to raise consumer prices until it lowers them again.
That would be the price for demanding US labor standards be used in making US products, too. If we wanted to stop depending on foreign slave labor for cheap disposable shit, I don't know how we do that without tariffs. "Free trade" is an active enemy of labor rights.
I don't think I have read anything so wrong about tariffs in quite a while. Tariffs either protect local manufacturing and/or slows consumption of said import. In both cases, it is inflationary.
Everyone keeps talking about "taxing the rich." Then Trump decides to tax luxury consumption and they all wig out.
Tariffs are supposed to change consumer behavior.
What's next? Is Bloomberg going to be telling us that fluoridation is preventing tooth demineralization and not actually helping the Communists?
The President and his followers think that Tariffs are something foreigners pay. And they still think that.
His followers may believe that, but Trump himself is obviously aware of what a tariff is. He seems to think that he can bully importers such as Walmart into eating the cost of tariffs and not passing the cost onto the consumer, but I suspect he really doesn't care. It makes for better optics if he pretends to care about consumers, but ultimately Trump only cares about Trump, and wants to use tariffs as a way to bully other countries to make himself look good - the tough deal maker. Some of his tariff "deals", such as with UK, have been laughable, but he's happy to go along as long as he can claim victory and get good press out of it.
I feel like we can't impugn any kind of belief about what Trump thinks about tariffs.
It appears to me that Trump sometimes uses the threat of tariffs to get him myself some emoluments. After that, many of his tariffs seem nonsensical
"Not Foreign Companies"? They can both pay. Taxes are negative-sum.
They will not.
Because the sellers can sell to another country without the tariff. American buyers have no alternative.
If selling to another country was just as profitable as selling to America (pre-tariff), they would have already been doing that. You're saying they are paying, but you're labeling paying as "not paying".
American buyers are the pretty girl, because they are in debt up to their ears and constantly taking out more. There's no secret alternative to the American market that everybody was ignoring until tariffs. Everybody else will be getting stuff cheap for a while because countries that are hit with tariffs will have too much production capacity, but those won't be profitable sales.
American buyers, however, can buy their products from anyone in the world. They can choose to buy domestically, or to import from countries that have lower tariffs.
In my trade economics textbook years ago it was stated that the cleared customs cost of an imported good is no more than 30% of its final consumer price, and more typically 10%. The rest is inland logistics, retail costs, and marketing.
Further to that, 80% of the economy is services or otherwise has nothing to do with imports. Tariffs are not affecting haircuts or yoga classes or bank fees.
Seems to me like tariffs are being used as a convenient excuse.
Right, but if you double the cleared customs cost with a 100% tariff, many of those additional costs are levied as a constant margin, which tends toward doubling the retail price.
You might argue that the retail channel can eat the difference, but it doesn't make sense to make the same absolute margin on goods that are subject to volatile tariff policies. It makes it hard to predict how many units will sell, how much stock to maintain, and creates a big risk that any units on shelves will suddenly be devalued when these tariffs are rescinded.
you can't actually argue that the retail channel will eat the difference. that would be arguing that the financial market would eat the difference, and that's exactly what financial markets will not do. nor do you want them to, since the money in financial markets is your pension.
lay people have a broken view of what goes into a price and a profit, thinking that a "fair" profit should be some "reasonable" percentage. It's just not how it works, it works on multiplied rates. the financial markets exist to give large companies working capital. if the companies need double the working capital, the shareholders/bankers want double the returns. the alternative would be you getting a letter saying "hey, the returns on your retirement account are going to be halved, think of it like your retirement account is now half the size"
It would be fine for the overall increase in markets to be much less, if you just take the gains away from, say, the top 10% and give them to everyone else.
>Right, but if you double the cleared customs cost with a 100% tariff, many of those additional costs are levied as a constant margin, which tends toward doubling the retail price.
I’m sure you can find short term examples of this, but in the long run consumer products tend towards a pretty “fair” price given the cost of retail, marketing, shipping, returns etc - all of which are things that do not anywhere near double when you pay a tariff. Your fat margins are someone else’s opportunity; walk around Walmart or Home Depot or Amazon and you won’t find a lot of fat margins. So no, you won’t double retail prices.
Just because some retailer makes 3-5% profit overall, doesn't mean that the gross margin on each product is 3-5%. It very much isn't. I've heard doubling the import cost is typical. This allows enough margin for holding stock, the warehouses, floor space, lighting, staffing, transportation, insurance, promotion, clearance, etc., which eat up most of this gross margin.
The fair price accounts for all of these costs, which are significant, even at scale.
Import taxes can affect the price of, say, yoga classes. Not direcly of course (unless maybe you're following a correspondence/video course from India where you need to buy imported tapes), but you can think of it like this:
The price of food is based on the price of domestic produce and the price of imports. If taxes are levied on food imports it will raise the mean price of food. As yoga instructors need food to do their job (in fact, they need it to live), they would have to raise their prices.
What was the textbook and would you recommend it? This is an area where I would like to read something substantial and good.
Bingo.
Foreign labor seems to be one of the few things not covered by these import taxes.
that’s because they already spend a shit ton on sponsorships
We could tax outsourcing
honestly, it’s a little of everything. foreign companies will eat the tariffs to some extent, consumers will shift to less tariffed goods and consumers will pay the tariffs.
however, paying the tariffs is essentially paying taxes and the government needs money and there’s nothing wrong with that. this one has the extra sword of helping our other Americans find work and increasing the likelihood that foreign goods will be purchased from allied nations and not totalitarian dictatorships with goals that might end in ww3 with the usa, while not completely cratering our economic system with full and immediate decoupling.
> helping our other Americans find work
In the same way that laws against pumping your own gas help other Americans find work. It makes everyone else poorer instead of naturally created jobs which provide goods and services people want.
> increasing the likelihood that foreign goods will be purchased from allied nations and not totalitarian dictatorships
Citation needed, this round of tariffs have also fallen on our allies
Tariffs are just a mechanism to adjust the calculus of where something is made.
Consumers getting Nd:YAG lasers from China below cost are also weakening the laser supply chain elsewhere. Tariffs are a type of response to these situations.
Why do you argue with 'below cost'?
If you mean that we exploit Chinese people by not giving them the proper salary, living standard and retirement fund, yeah true
But parallel to that, automatization has reached a level we never had before.
I don't think tarifs would lead to more capital in USA in the right/expected pockets.
On the topic of "where things are made":
"If you look at page 1 of the tariff handbook, it says: Don't tariff inputs. It's the simplest way to make it harder—more expensive—for Americans to do business. Any factory around the world can get the steel, copper, and aluminum it needs without paying a 50% upcharge, except an American factory."
https://bsky.app/profile/justinwolfers.bsky.social/post/3lud...
They should be that. But a Tariff on avocado exports from Mexico doesn't mean more avocados get grown in the US, because it simply isn't possible.
Tariffs need to be applied surgically and... they are not
It would take many years for production to meaningfully ramp up, but there absolutely is a lot of land in California that could be used to grow avocados if it made economic sense.
So, on to the next example: Brazilian coffee.
Technically Hawaii and maybe Puerto Rico.
But those areas don't have anywhere close to the land of Brazil, Columbia or Vietnam.
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Another example: bauxite ore (Australia is our chief partner in that IIRC). USA somehow is missing the raw ore for Aluminum despite nearly everyone else in the world having it.
There's lots of things we can't make
Correct, I know that coffee is grown on Hawaii, but it simply doesn't have the land area at the right altitude necessary to do so at the required scale.
Something not quite the same, but parallel is happening with Florida oranges:
> Only 12m boxes of oranges will have been produced in Florida by the end of this year (2024), ... The figure is 33% lower than a year ago, and less than 5% of the 2004 harvest of 242m boxes.
> It is also dwarfed by the 378m boxes expected to be produced this year in Brazil
https://www.theguardian.com/us-news/2024/dec/22/florida-oran...
Greening disease is the primary cause of decreased citrus production in the US https://citrusindustry.net/2024/05/07/florida-orange-product...
That's what the linked article says, yes.
And tariffs won't change that.
Some enterprising company needs to brand yaupon for the maga crowd.
It needs a name change.
Much like "Chinese gooseberry" was rebranded as "Kiwi fruit".
Maybe "Ilex vomitoria" -> "Patriot puke". "Spew American!".
What are you talking about? These tariffs are used to combat the influx of fentanyl from China, Canada, and Penguin Island.
yes, sure, except in many cases, where something is made has nothing to do with market forces and everything to do with geology.
As such, the way in which they're used can easily be disguished between "hidden tax" and "design to affect production location".
These tariffs are, as a whole, about adding a hidden tax.
Do you think all the stuff made in China can be made at the same price in the US?
At the end of the day the prices still rise just not as much as with the tariffs but higher than foreign made without tariffs.
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Try asking ChatGPT what are the intended effects of these tariffs. It's to benefit ALL Americans.
Also, obvious political bias.
Supply side economics, which aims to stimulate growth by reducing costs for industry, is jeered today as “trickle down economics”; it’s considered regressive because the benefits are concentrated for suppliers while the benefits to consumers never materialise. This policy has “failed every time it’s tried!”
Tariffs are the antithesis of supply side strategy. Yet tariffs, which increase costs for suppliers like any other tax, are derided by the same people as “regressive” as if they will always be born 100% by the consumer. Supposedly, tariffs cannot possibly benefit the working class on any time scale.
At least one of these positions must be at least partly wrong. Which is it?
Both of these can be true. Compare the US to countries like China for example, which has had success growing its economy with more state led companies and financing through state owned banks. It’s not perfect, but compared to western countries, less of the profits go to the private sector, and it allows the government to more directly chase long term strategic goals.
Does partly wrong imply they can both be partly right?
Regardless, within the current system (which is not based on theory and based on reality), we combine these elements, and neither seem to directly benefit certain industries depending on who you're looking at. If it does, these policies may not benefit everyone.