Trump promised voters tariffs are a panacea for the economy, but Walmart finance chief John David Rainey warned they will be inflationary for customers.
American companies will pay for the tariffs, and then we the consumers who buy their products will pay for the tariffs via price increases.
This is money that we will invest. It is a tax. It is the government causing us to spend more money.
It is not a usual tax in the sense of money paid to the IRS. But it is an economic cost that we will pay in order to support a government policy.
The cost is paid to enact a certain outcome. The outcome is less importing of goods, and more of those goods being provided by sources within our borders. It will cost money to make this change. That cost will be paid by us.
We are being forced to pay money to enact a policy. That’s how it’s essentially a tax.
Except this policy is basically:
More stuff that American consumers consume, will come from American companies
There will be more manufacturing capability to meet this demand
There will be more demand for American labor, improving the lives of American workers
We will be more militarily capable due to being able to build more things in-house
That is a set of changes being targeted by this policy. We will pay for this policy by paying higher prices. The intention, the hope, is that the policy will pay for itself in terms of the third bullet point: more manufacturing in America means more jobs for Americans. More demand for American stuff means better bargaining position for American workers, means more income.
In the short term it’ll suck. Just like any other heavy tax can suck in the short term, before the benefits can manifest and make it worth it.
This was tried under Trump the first time and it was an abject failure.
Trump’s tariffs raised the price of foreign made dishwashers by 20%. American manufacturers also jacked up the cost of their appliances, in order to match that price that customers were paying. As a result there was no incentive to change consumer behavior and there was no boost in “buying American.”
Economics really isn’t my strong suit so the fact that the outcome is surprising or confusing to me isn’t entirely unexpected but I have to say that outcome is actually kind of surprising. I would have thought the theory for how the tariff was supposed to work was that the 20% increase in price seen on the ground for foreign made washing machines owing to the cost of the tariff being passed on to the consumer would mean that the domestic producer of washing machines could expect to look more attractive on the shelf than the foreign made ones for being cheaper. The domestic manufacturer could also afford to be cheaper in a way that’s easy for them to achieve because they don’t face the artificial increase in the cost of making and selling their washing machines. This would mean they had the opportunity to sell more of them than their foreign competitors resulting in higher profits. If they saw it as an opportunity to raise prices by 20% without being punished by their competitors, wouldn’t that eliminates their natural advantage? Seems they’d be leaving money on the table. I would have thought the more likely outcome you’d see would be the domestic company essentially raise prices by something more like 19% so that they still get to profiteer from the chance to raise prices without penalty in the marketplace and unlike their competitors keep that as profit rather than put it towards paying tarrifs, but still be cheapest on the market meaning increased sales. You’d see a double benefit from their perspective. I mean that would still completely suck, everyone would be paying 19% more than when they started, but you’d think you’d see some of the intended desireable effects of the tariff in this one simple example of the washing machines, ignoring other factors.
What will the incentive be for these supposed new manufacturers, who just spent a whole lot of money building factories, to offer significantly lower prices than what Americans will have already gotten used to paying by the time said manufacturers have been able to build out their production facilities?
Better yet; Why would these manufacturers even invest in building out these supply lines when they can’t be sure that the next administration won’t remove the tariffs? Seems like a risky investment.
Yes. We will pay for the tariffs.
American companies will pay for the tariffs, and then we the consumers who buy their products will pay for the tariffs via price increases.
This is money that we will invest. It is a tax. It is the government causing us to spend more money.
It is not a usual tax in the sense of money paid to the IRS. But it is an economic cost that we will pay in order to support a government policy.
The cost is paid to enact a certain outcome. The outcome is less importing of goods, and more of those goods being provided by sources within our borders. It will cost money to make this change. That cost will be paid by us.
We are being forced to pay money to enact a policy. That’s how it’s essentially a tax.
Except this policy is basically:
That is a set of changes being targeted by this policy. We will pay for this policy by paying higher prices. The intention, the hope, is that the policy will pay for itself in terms of the third bullet point: more manufacturing in America means more jobs for Americans. More demand for American stuff means better bargaining position for American workers, means more income.
In the short term it’ll suck. Just like any other heavy tax can suck in the short term, before the benefits can manifest and make it worth it.
This was tried under Trump the first time and it was an abject failure.
Trump’s tariffs raised the price of foreign made dishwashers by 20%. American manufacturers also jacked up the cost of their appliances, in order to match that price that customers were paying. As a result there was no incentive to change consumer behavior and there was no boost in “buying American.”
Wow, it’s almost like companies will take any excuse they can to raise prices and make more profit.
Economics really isn’t my strong suit so the fact that the outcome is surprising or confusing to me isn’t entirely unexpected but I have to say that outcome is actually kind of surprising. I would have thought the theory for how the tariff was supposed to work was that the 20% increase in price seen on the ground for foreign made washing machines owing to the cost of the tariff being passed on to the consumer would mean that the domestic producer of washing machines could expect to look more attractive on the shelf than the foreign made ones for being cheaper. The domestic manufacturer could also afford to be cheaper in a way that’s easy for them to achieve because they don’t face the artificial increase in the cost of making and selling their washing machines. This would mean they had the opportunity to sell more of them than their foreign competitors resulting in higher profits. If they saw it as an opportunity to raise prices by 20% without being punished by their competitors, wouldn’t that eliminates their natural advantage? Seems they’d be leaving money on the table. I would have thought the more likely outcome you’d see would be the domestic company essentially raise prices by something more like 19% so that they still get to profiteer from the chance to raise prices without penalty in the marketplace and unlike their competitors keep that as profit rather than put it towards paying tarrifs, but still be cheapest on the market meaning increased sales. You’d see a double benefit from their perspective. I mean that would still completely suck, everyone would be paying 19% more than when they started, but you’d think you’d see some of the intended desireable effects of the tariff in this one simple example of the washing machines, ignoring other factors.
Lol
What will the incentive be for these supposed new manufacturers, who just spent a whole lot of money building factories, to offer significantly lower prices than what Americans will have already gotten used to paying by the time said manufacturers have been able to build out their production facilities?
Better yet; Why would these manufacturers even invest in building out these supply lines when they can’t be sure that the next administration won’t remove the tariffs? Seems like a risky investment.