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Comment by dataviz1000 | Hacker News Reader

The article is focused on global commodity price trends rather than being exclusively about U.S. prices.

Coffee will get more expensive in the United States which is great for Puerto Rico -- although the kids in San Juan would prefer a protectionist strategy of growing crops that they consume themselves than exporting to the mainland.

Because the price of imported goods will increase in the United States driving down demand within the United States, exporters will have more supply which will drive down price to the other 100+ countries they trade with.

Once countries like Thailand and Peru start to trade more amongst themselves there probably isn't a return to same trading with the United States who will be like the kid on the playground nobody wants to play with.

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I think its a mistake to think that coffee consumption in the US will diminish even a bit due to tariffs. They will just pay the higher prices. Coffee consumption ranks just above self-actualization in the hierarchy of needs.

I would think that you could be right, but it could also be the opposite.

Low demand in the US, means less sales to US, so they may try to make up for the loss of profit on the US market by increasing prices on other markets... So global price increase.

E.g. Apple likely to increase prices on iPhones world wide to make up for the loss in US.

This feels completely unpredictable.

> Low demand in the US, means less sales to US, so they may try to make up for the loss of profit on the US market by increasing prices on other markets... So global price increase.

This is not how supply and demand works in a competitive market. If demand drops, supplier compete on price and it leads to a reduction in price. They don't up the price to try to "make up", they can't, because someone next door will accept the lower price to get rid of their supply.

The United States government is adding massive taxes on everything the United States consume. Please add what we know about what happens when the United States drastically increases taxes to your equation.

Instead of hinting, can you spell out what you think is wrong with the parent hypothesis?

I'm reading it as: US prices go up. US consumption goes down. Less global demand for same global supply. Result: global price goes down.

Where are we disagreeing?

Misread what you said. You are correct.

For perishable goods, you cannot make up for loss of profit by increasing prices: storing goods has a cost, disposing of goods has a cost, and you have a window of a few months (a year at the outside for coffee) where these goods are viable. After that, your 100 tons of coffee is 100 tons of compost. You cannot produce “less coffee”: it’s already planted, and in some cases, harvested! You get what you get! So the rational act here is to have whatever customers you have left “dispose of” more of it for you: by lowering the price.

If supply increases and demand stays the same, price goes down. If supply decreases and demand stays the same, price goes up.

More likely, another force is the expectation that the world economy will contract decreasing the demand for everything everywhere driving down the price despite the taxes increasing the price for United States consumers.

That's not how it works. You don't increase prices to "make up" for lost profits elsewhere. There is a lot of microeconomics research into why firms set the prices the way they do and that isn't it.

With coffee maybe. With tech I doubt it. If US companies raise prices worldwide, companies from the rest of the world will be in a great position to gain market share, if they don’t (as far as economy of scale permits). If iPhones are suddenly 30% more expensive in the EU and Chinese phones keep their pricing, it’s going to drive Chinese phones market share up. Even more so for products that aren’t premium/compete on cost, like Google Pixels.

If you were able to demand higher prices even with lower demand, you would demand higher prices.

In other words: It doesn't work like that. They might want to try to make up for the loss, but they have to compete with other manufacturers, some of whom will be desperate to make up the sales at lower prices.

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