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Comment by dghlsakjg | Hacker News Reader

Kind of.

Econ 101 normally covers tax incidence (which side bears the burden of a tax). It has a lot to do with elasticity of both demand and supply. If foreign exporters can easily shift to other markets or adjust production (elastic supply), they'll pass most of the tariff cost to consumers through higher prices. If American consumers have few substitute products (inelastic demand), they'll end up absorbing most of the cost. Of course if the opposite is true, the sellers end up eating the tariff.

The reality is that tariffs typically get passed through to consumers as higher prices, not absorbed by exporters. The exact split depends on how flexible each side can be, but empirical evidence shows consumers usually bear most of the burden.

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For that to work, the tariff should be targeted and selective. A tariff on everything can hardly be justified

The granularity of the targeting seems like a separate issue (I could be wrong though). The tariff should shift people to buying from non-tariffed suppliers. Targeted means it could shift people to importing from other counties. Broad should shift people to buy domestic, right?

I mean, just to be clear, I think the tariffs are a bad plan. But targeted vs broad seems more like an implementation detail… the big picture plan is the bad part!

> pass most of the tariff cost to consumers

What do you mean by "pass the cost"? Exporters do not pay tariffs, importers do. The exporter doesn't give a shit because it doesn't affect them at all.

This is one of the most fundamental misunderstandings of how tariffs work in the first place. The entity that's picking up the cargo at the port is who literally has to pay CBP for them to release the goods. The middleman (say, Walmart) may pass the cost to customers or whatever, but tariffs are entirely inconsequential and irrelevant to foreign exporters. There's no way to send a bill to a foreign entity demanding a tax for some goods that have arrived at a port, after all.

The exporters care because tariffs cause the demand curve for their products to shift to the left. As a result, the exporter can either choose to lower prices or sell fewer items. If they choose to lower prices, then that means the cost of the tariffs has “passed onto them.”

> The exporter doesn't give a shit because it doesn't affect them at all.

Well that’s not true. Otherwise you are going to have to explain why so many outside the USA were upset with tariffs, and why there were retaliatory ones applied on the inverse.

I make no other claim that your quoted assertion is wrong.

It relies on understanding that the person paying the bill for the tariff is not necessarily the person that takes the economic hit. If you read the second half of the sentence you quoted it hints at that. The exporter does "give a shit", because all other things being equal, the net cost of the product has gone up, which will reduce demand (and therefore sales at a given price point) in any market that has the slightest bit of elasticity, which is just about every market.

Simplified: a seller can lower their price by the amount of the tariff. The buyer is responsible for paying the tariff bill, but the seller is the one eating the cost at the end of the day, it is "passed" to the seller.

Alternatively, the seller can refuse to budge on price. The seller makes the same amount per unit, and the buyer gets the privilege of paying the tariff while not receiving any sort of break on the price. The entire cost of the tariff is "passed" to the buyer.

Still missing the forest for the trees a bit but you're right, my wording could have been better. What I'm getting at is tariffs are generally unrelated to foreign sellers: they're not charged to them, they're not responsible for them, and the entire narrative about how "we're going to make foreign producers pay tariffs" is false. Just like "pass" is the wrong verb, because there's nothing to pass: the tariff was charged to the importer/consumer in the first place.

It's no different than, say, the state of Oklahoma deciding to increase taxes on new vehicle sales by 10%, and playing it as "we're going to make Toyota pay more to sell vehicles here!" Toyota isn't paying anything, is unlikely to change its global pricelists in response, and won't really care... because it's a state charging its own citizens more tax, nothing more. Just like these tariffs were a country charging its own importers more "tax" to punish them for buying abroad.

You're talking about the trees (who literally pays taxes) I'm talking about the forest (which parties in the entire system end up less economically well off because the tax exists, AKA tax incidence)

I'll use your example. Your argument is that when Toyota sells fewer cars as a result of a new tax increasing the landed cost of their products, that they aren't being made worse off? Sure Toyota isn't literally cutting the check to the state, but unless they are selling a product that is perfectly inelastic (they aren't, no such product exists in the real world), they will have less revenue, ceteris paribus.

I get that the suppliers aren't literally paying for the tariffs via transferring dollars to the US CBP.

I am saying that reduced demand and sales for a product as a result of a higher cost is an actual realized loss for the producer caused by the tariff. The producers are paying an economic cost for the tariffs by either reduced volume or reduced margin. My citation is the article you are commenting on.

This is a well known, demonstrable and universally accepted concept in economics you are trying to argue against. It is called tax incidence, and it very intentionally discards who pays the tax directly, and concentrates on the respective proportions of consumer and producer surplus that are claimed by the increased tax.

This is literally what the paper this post is linked to is about; what proportion of the economic cost of the tax is borne by the seller and what portion is borne by the buyer. Go get

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