>It flies in the face of any common sense.
The consumer paying the tariff is merely an optimization over the exporter paying the tariff such that the tariff money passes through one less hand. Practically they seem pretty similar.
The consumer paying the tariff is merely an optimization over the exporter paying the tariff such that the tariff money passes through one less hand. Practically they seem pretty similar.
If the demand curve is very price sensitive - like people might stop buying wool blankets if the price went up 50%, and buy cotton blankets instead - then the tariff will be paid by the suppliers, because they must lower their prices to make the final price the same.
And similarly, if the buyers are inelastic, they will pay the tariff. Like for baby formula, maybe parents are willing to stomach significant price hikes without changing how much they buy.
Nobody can predict this. Tariffs are used by trump mostly as a negotiation and distraction tactic. In that sense they've been extremely effective.
yes, as a pump and dump scheme. He and people in his administration have made a lot of money with tariffs!
Did those not introduce inefficiency? Actually, it probably produced more inefficiency because most people were probably under thr impression most of the world was under free trade, hence the existence of the WTC.
Not knowing a tax is much more inefficient than knowing a tax.
> Not knowing a tax is much more inefficient than knowing a tax.
Why would this be true?
And the people buying cotton blankets are materially worse off than they were before the tariffs were imposed. They have to accept an inferior product until the wool supplier’s prices have adjusted. Or the wool supplier folds and not nobody can buy wool blankets anymore.
Before a tariff is imposed, the seller sells the good for $10 and keeps $10 in revenue.
If a tariff of $1 is imposed under these hypothetical circumstances, does the buyer pay more? Does the exporter get paid the same as before?
Clearly, it's neither guaranteed that the buyer will "pay more" nor that the export will "get paid the same as before". In reality because demand is neither 100% elastic nor 100% inelastic, what tends to happen is that the cost of the tariff is split in some ratio between the buyer and seller.
I find it mildly amusing that there are so many people claiming that it's 100% on one side or other, when it's trivially easy to see why that can't be GUARANTEED TO BE the case.
To be fair most people on one side think they know better than Adam Smith and the people on the other side usually never opened a book, so it's a tough bargain.
One problem with this analysis is that I can't imagine Trump doing it, or even understanding it. Well, it's not a problem with the analysis, but with the overall situation.
[1] https://www.ussc.edu.au/chinas-trade-restrictions-on-austral...
The correct thing to say is that the tariff has an effect on demand because of the impact of adding a tariff on top of the price.
If it's a company, the company pays and might pass it on.
Edit: to be accurate, the importer is legally responsible for the customs declaration and the tariffs, regardless of who does the declaration and who pays. Typically someone else does the declaration on your behalf, and typically they forward any tariffs to you.
And the data shows that American buyers are not paying their international supplies less for goods than they were before. In fact, if anything, they are paying slightly more, which maj be explained by general inflation and the fact that tariffs mean American buyers are placing smaller orders and therefore getting smaller percentage volume discounts.
you cannot just carbon tax everything locally and then let the other corner of the word produce at a fractional price polluting the same world, exploiting worker etc, without wrecking your internal labor market.
What you see as customer paying more is cause by government letting this shit go on for too long, and now the correction is ugly. But it not like its not needed, and at some point needs to happen before it reaches the breaking point.
I'm not in favor of the current round of tariffs as used by current administration which seem a baseless negotiating tactic, but the effect of outsourcing to bad faith actors has pushed the working class out of balance, they simply have no way of competing internationally unless by accepting a step downgrade in working and living conditions
My country mostly produce pine wood (and other soft wood). I like hardwood furniture, but its only imported stuff because we have very few producers. Putting a tariff on hardwood furniture could be a good idea to increase local production, as long as hardwood is not tariffed. If both hardwood and hardwood furniture get taxed, i will have to pay more, and local production will never have greater margin, as those will be hit by base material tariffs.
(To be clear: I live near on of the biggest hardwood harbour in Europe, and buy my wood directly out of the sawmill, but my point stands)
It opens up a larger profit margin for local producers for sure. Production? Maybe. Maybe not. Because there is no incentive to produce more or better. Because the cheap bad faith actor is gone and prices can now match the export price or be just slightly below it.
>but the effect of outsourcing to bad faith actors has pushed the working class out of balance, they simply have no way of competing internationally unless by accepting a step downgrade in working and living conditions
> What you see as customer paying more is cause by government letting this shit go on for too long, and now the correction is ugly. But it not like its not needed, and at some point needs to happen before it reaches the breaking point.
You don't seem to see the contradictions in both these statements. If the prices go up and working class isn't paid as much for their effort then it is for naught. The failure hasn't been to continue outsourcing, failure has been to improve wage conditions - because market was supposed to correct it or worst case it is "socialism" to even try and raise wages.
But as always people want to test economic theories for themselves and they should. See if their lives improve under a capitalist government which is going to trample on their rights.
That is the argument of the Administration:
>> Kevin Hassett's theory of tariffs: "China has got to sell a lot of stuff to us to maintain political stability. And so if we put a tariff on their stuff, then they cut the price so that our consumer is basically still able to demand as much stuff as they need to sell to be politically stable."
> If he were right, the import price index (which measures pre-tariff prices) would have fallen by enough to offset the sharp tariff hike. It didn't.
> [graph of said index]
* https://twitter.com/JustinWolfers/status/1981928861547041162...
Yup. And it can't be guaranteed that the sun will rise tomorrow.
As such, want to bet on it?
In particular your "Let's imagine" case is sort of ridiculous. There are no such goods, nor anything even comparable. The very existence of inflation disproves the idea (since if those inelastic goods existed, they'd see demand drop to zero if the price needed to inflate).
Some companies might chose to loose the margin (few but still passable ). Some might try to pass some or all to the sale price (which creates all sorts another dynamics) and finally the customer does not have to buy that product. There are many note breakdowns that all adjust who pays and when they pay.
Exporter pays: Consumer ends up paying price + tariff, then seller pays the tariff to the shipping company, which pays it to the government.
Importer pays: Consumer pays price, then later pays the tariff to the shipping company, which pays it to the government.
In both cases the consumer is paying price + tariff. A small difference is that some consumers could be psychologically tricked by the lower price tag in the importer pays model. Note that what I'm saying doesn't concern itself with changes in pricing due to this.
That's the problem with your semantics then. If the manufacturer no longer makes the same income because they can't increase the final price, in effect the consumer didn't pay the tariff.
if exporters paid tariffs, every country would put tariffs on things that they didn't make themselves. they only do it for things they're trying to compete in making. can you figure out why?
If the exporter charges the same price, the consumer pays more, the exporter get the same as before, and the consumer pays the tariff to the government.
The consumer always pays the tariff. The exporter never pays the tariff.
the fact is that IRS is collecting money from the suckers who voted for this and you're desperately trying to make it sound like the exporters are paying for it.
If the foreign supplier pays the tariff the country COULD be better off in net terms when you add the consumer + government together assuming the government spends all it takes which in a deficit situation is a reasonable assumption.
Consumers pay all of the operating costs and taxes of a company. That's not the debate.
With tariffs, the cost of an imported product becomes higher than a domestically produced product, making consumers purchase the domestically produced product. This is the purpose.
The long-term purpose is that foreign companies start making their products in your country to avoid tariffs and be able to compete.
The discussion about if the buyer or seller pays the tariffs or taxes is non-sensical and a distraction.
There is no long term in the US anymore. TACO flip flops every few days, based on who he spoke to last.
Promote the consumption products provided by a different vendor. Namely ones that tariffs don’t apply to.
It’s not a hard concept to understand, and talking about who pays is a distraction. Namely because it will be case by case involving 3 or more parties who won’t all chose the same choices they have every time.