Trump Does his Awesome New Tariffs. Winning!!

According to Google, values between 0 and 1 are considered “inelastic”..

• Value range:
  A price elasticity of demand value between 0 and 1 is considered low or inelastic.
• Interpretation:
  When the elasticity is less than 1, a percentage change in price results in a smaller percentage change in quantity demanded.

 

Generally agree, although I think that is also an all else equal argument. I do think the Chinese cooperation on precursor may have helped some (we have seen a decrease in potency since implementation). It could be temporary as cartels adjust, but at least there was some positive impact to stressing that part of the supply chain. But, longer term, it could be that the cartels start adding worse junk into the fentanyl to up the potency again.

 

all I needed to show was that it was not 0. Your own post shows that increased prices are not the only affect.

 

But how would what you highlighted there hurt the seller? If they are charging 1% more, and selling less than 1% fewer products, wouldn’t they be coming out ahead?

 

Unless you have perfectly inelastic demand, you CANNOT pass 100% of the price on. How are they "charging more"? the price the consumer pays does not = the price the producer gets when you have tariffs. My cousin has been a lobbyist for PM (alteria?) for decades. Why do you think they care about cig taxes?

you can make a VERY solid case against tariffs w/o relying on absolute statements that are untrue.

If you google it, you'll see that companies are moving their production & supply lines away from countries that are getting these tariffs. It makes little sense to me to do that if they aren't hurt by them.

here's 1.
Like all footwear companies, the majority – about two-thirds – of Steve Madden’s business relies on goods that are imported to the United States, the company noted. And of those imports, 70% are from China. So that’s a lot of rejiggering to do.

That’s why Rosenfeld said the company worked for many years to get a new network of factories in place that would allow the company to continue to do business without paying that hefty China tariff that Trump has said could be upwards of 60%. That’s larger than the various tariffs on Chinese goods Trump imposed in his first term – and President Joe Biden largely kept in place – that ranged from 30% to 50%.

The point of tariffs, in theory, is to incentivize US manufacturing by making imported goods comparatively more expensive to made-in-the-USA stuff. But here’s the catch: Steve Madden isn’t moving its production to the United States. It said it will be sourcing its goods from Cambodia, Vietnam, Mexico, Brazil and some other countries.

https://www.cnn.com/2024/11/08/economy/steve-madden-china-trump-tariffs/index.html

 

I’m not sure I agree with all of your points. Of course tariffs hurt the exporting country. It makes their goods more expensive, creates opportunities for competition, and as a result depresses the overall GNP.

Here, though, a 10% tax will have minimal impact on Chinese exports into the US. It’ll increase prices here, but it’s not too high to allow US domestic manufacturing to match or better price. It won’t likely dent Chinese imports here.

 

As far as taxes, I would love to see a comprehensive study in the feasibility of consumption/use tax vs income tax.

 

That's a fair point that I didn't consider. But this is how I see it ... if we put a 20% tarriff on something like in your chart, with low elasticity, then a $1 product goes to $1.20. Maybe the exporter sells that product for $0.50, and sells 10% less, so down $0.05 cents in sales. In that scenario, Americans are paying 20 cents more to hurt the exporters by 5 cents in lost sales (which doesn't even necessarily equate to a 5 cents loss by the producer, if they cut costs by scaling back production) ... and that also assumes that the exporter is unable to sell their products elsewhere to make up the difference ...

You are right, I shouldn't have spoken in absolutes. Let me revise that to tariffs hurt the importers more than the exporters.

 

That's why I laid it out that way. I said the "tarriffs themselves" don't hurt China because China or Chinese companies don't pay them. If the tarriffs reduce demand in the US, they could find other trading partners. Competition may eventually rise from other countries, but there is a reason why low wage countries dominate manufacturing, so it would probably just come from some other country as bad or worse than China. I mean, why should American pay 20% more for Canadian goods just to help India get a foothold in some other industry, or shift production and demand so Russia can broaden it's market?

 

But even if they could pass the full cost on, they’d be selling less unless every demand curve is perfectly inelastic

i

 

You guys are funny. We get about 10-15% of our materials from China and maybe 5% from Mexico+Canada. If prices go up from tariffs loaded into the final cost we will either pay that higher amount or look for another country that was already higher than China. Either way it’s higher costs.

We will raise prices to our customers to cover our required profit margin plus the new costs and reduce the number we sell. We will make better margins and the customer will get less value. The whole industry will do this in unison so none of us starts a price war.

Plus our costs will go down handling fewer units while we charge more so we will need less employees.

Oh well. That’s what they voted for.

 

But the part you are leaving out is that the demand curve would only change in America where the tariffs are. If China loses 5% of their sales in America, they could make it up somewhere else with new export partners ... like Canada and Mexico and other countries we also pissing off, and hitting us back with their own tarriffs.

 

my bet is the tariffs on Canada and Mexico have to do with border control and security

 

why would they hit us with tariffs if it will only hurt them?

 

Trump literally stated in his tweet that this was because the US has a bad trade deal with Canada and Mexico (a deal he negotiated, BTW).

 

Their tariffs probably will hurt them more than it hurts us, but they can't just smile and take it. This is just dick wagging, and retaliatory dick wagging, at this point.

 

wait, so tariffs can hurt producers?

 

Huh? I think you got it backwards. You asked me why Canada would hurt themselves with tarriffs on IMPORTS. So in that case, they are not the producer.

 

Nobody wins in trade wars. And while we'll pay more, remember, we will also suffer from job losses. Millions of Americans work in import/export, and with less goods flowing both ways because of higher taxes, less work to be done.

Ironically, three states that voted red are likely to be effected most by less items flowing from Mexico and Canada. Texas and Arizona for Mexican imports and exports, and Michigan for Canadian goods.

 

Yep. & you answered they they would hurt us.