Comment by scottbez1 | Hacker News Reader

Comment by scottbez1 | Hacker News Reader

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I run a tiny (<$30k annual revenue and much much smaller profit, or negative if I paid myself an hourly wage) side business that relies on custom manufacturing of open source hardware products I've designed. So very much not a "wealthy fat cat" - here's my experience with manufacturing:

For die-cut plastic cards (think custom-shaped gift cards or hotel door hangers), I reached out to several US manufacturers for quotes and most never even responded. The one that did respond basically laughed at me and said my design was impossible to cut. So I went on Alibaba and had tons of quotes instantly and found a manufacturer. Not one of the responses were concerned about the design's manufacturability. And the manufacturer I picked does an incredible job with what is admittedly a challenging die cut design.

As a tiny business, most of my orders end up being under de minimis (which is actually great for helping small businesses avoid the overhead of dealing with tariffs and level the playing field against large players that can be much more efficient at handling regulatory overhead through high volume).

But with the change to eliminate de minimis and increase tariffs another 10% essentially overnight, my COGS is going to increase ~30%, which means either I shut down my business due to losing nearly all of my margin, or I increase prices substantially. It just hurts consumers AND small businesses like mine in the US.

There isn't a US manufacturer I can switch to (again, price wasn't the issue). And the US manufacturers in the space that WERE still selling products despite the international competition will just increase their prices now that competition is more expensive.

That is what people like trump don't understand (not surprising). Instead of gradually rebuilding the manufacturing capabilities of the US while supporting essential industries (like steel production) to create competition, they think slapping tariff will magically make the domestic manufacturing come back. Like you said, the US manufacturers will just ride along the coattails of tariffs instead of trying to be competitive and/or expand their production (they have no incentive to do so).

Again, knowing how short-sighted the US politicians and the society as a whole (e.g., look at how a majority of corps only care about short-term/quarterly profit) have become, it is not surprising but saddening to observe (because I have been living in the US for a bit over two decades and cannot move back to my home country, which is, at the moment, riddle with civil war).

But there is new incentive created here. Now someone can create a small business to serve die-cutting like the parent needs because they have the extra edge over the Chinese competition. These sorts of small shops that did small runs used to be part of the economy before they closed after they couldn't keep up with the low cost coming out of China and they can in theory come back if making stuff in China becomes expensive enough.

Is that an immediate win for the consumer and the economy? Probably not. In the long term it could be reversing the globalization which is maybe a good thing (or at least that's the argument).

Anything imposed on the whim of the executive can be taken away just as easily, so building an entire factory based on an assumption about tariffs remaining in place is probably a hard sell.

As the joke goes only two things are certain in life, death and income taxes.

Seriously though- yes. But it moves the needle a little bit on the expected value. If the tariffs survive for a year it'll move the needle more.

> But there is new incentive created here. Now someone can create a small business to serve die-cutting like the parent needs because they have the extra edge over the Chinese competition.

You’d need dramatically higher tariffs for there to be any chance of that. Or a complete trade embargo. And either way, it’s gonna mean much more expensive goods for consumers.

> Instead of gradually rebuilding the manufacturing capabilities of the US while supporting essential industries (like steel production) to create competition, they think slapping tariff will magically make the domestic manufacturing come back.

So what would you propose as the proverbial kick in the butt to encourage domestic production? And before you say “subsidies”, remember that a large segment of the population isn’t wild about those either because they perceive it to be some sort of evil tax dodge for big corporations (see: literally every time some state gives a company incentives to build a plant or office).

The reason we’re in this mess in the first place is because we chased cheaper means of production and once everything at home was gone, we just threw our hands up and went “well it’ll be too painful to fix it, anyone who tries is an idiot.”

We've moved away from lower value manufacturing and are moving higher in the economic chain - that's great for us and how economics works. It isn't just chasing cheaper means of production - we can (and in a limited way have) put people to work elsewhere.

We dodged this in the 90s, but we need massive training programs to move those displaced workers to new jobs + resettlement assistance to get them to where the jobs are.

Unfortunately, the vast majority of jobs and manufacturing is in The lower value manufacturing chain. So by chasing only the high value chain, you abandon the manufacturing operations that actually hire workers, thereby hollowing out the middle class of your country and reducing the consumers of the products that you sell. A counterproductive and shortsighted strategy.

> see: literally every time some state gives a company incentives to build a plant or office

You're conflating two things here, the subsidies are one issue but the bigger issue is the ability for large companies to "shop around" states looking for the most favorable tax incentives. Our government shouldn't be bidding against ourselves.

Our government shouldn't be bidding against ourselves.

Yes, it should, because that's how individual companies (and governments for that matter) find their optimal operating points.

That is the explicit central dogma behind the United States' system of government. It works pretty well for the most part. If all the states had the same laws, policies, and taxes, there would be no need for federalism at all.

Looking for the most favorable tax climate is fine. The practice where states will roll out huge one-off incentive packages is where I take issue.

> they think slapping tariff will magically make the domestic manufacturing come back.

Certainly not when tariff policy changes every few days on a whim. That doesn't make you want to build a chip resistor plant in the US. Or even a smartphone plant.

Indeed.

Or when you have trade agreements in place, but then use emergency powers granted to you in 1977 to push aside those agreements and add tariffs

It doesn't engender trust.

Businesses within and without are not a fan of constantly shifting sands.

I don't get it. You go into the grocery and pay sales tax on food for the week, but you import random trash from China, pay nothing and this is "great for helping small businesses"? No matter what you think about wholesale tariffs, surely this particular arrangement must strike you as odd and impossible to compete with for local producers?

In the EU we pay full taxes on every import, it's really not that complicated once you explain to the Chinese guys to not mark it as "gift" like its 2005.

You pay the same taxes on imports too. In fact in the USA some states will hunt you down to ensure you pay tax on interstate purchases let alone imports.

Eg. https://www.quora.com/Do-I-need-to-pay-California-sales-tax-...

Now tariffs are different because they are applied in addition to the above and only affect imports specifically.

Not really. EU sales tax is typically 19…21% while the highest sales tax in tge US is in CA and it's 7.25%.

Buy hey, now you,'ve got trarrifs, congrats on your election.

You're mixing concepts. In the EU you'll generally pay VAT on all imports, but there are still often de minimis rules for import tariffs. This is not unlike the US - I have to always pay sales tax on imports regardless of value (unless it's being resold or incorporated into a product and I have an appropriate resale certificate, because sales tax is generally only required on final sale in the US), but import tariffs have a de minimus threshold.

I'm not saying the primary objective of a de minimus policy is to help small businesses, but in practice it can make a huge difference to correct for economies of scale to promote competition. I can't afford a team of lawyers and lobbyists to creatively classify my products to avoid tariffs like the big companies do; regulatory burden disproportionately hurts smaller players, so it's typically considered good policy to promote competition to phase in regulations based on size/volume/revenue etc.

“And the US manufacturers in the space that WERE still selling products despite the international competition will just increase their prices now that competition is more expensive.”

And an industrial entrepreneur, such as yourself, might start a new business, making these products at a cheaper price in the US due to the new inefficiencies of simply raising prices by existing manufacturers. It takes time for these things to move through the system.

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