Doesn’t stop them passing the “tariff charges” on regardless if they actually have to pay or not
Don’t be surprised if these companies suddenly show 10-25% increase in net profits.
That’s the whole point. Raise the price on things and then American producers can compete.
Why tariffs are stupid in three acts
Act 1
American producers: I can’t compete with that $10 foreign product, I have to sell my product at $12 to turn a razor thin profit.
Politician: ok I’ll slap a $5 tariff on the foreign product to protect you.
Act 2
American producer: awesome so now the foreign product costs $15! I can compete
American consumer: oh well I guess I can spend $12 instead of $10… sucks but America first I guess
Act 3
American producer: no need to leave $3 on the table, let’s sell ours for $14.99, I need more profits because everything I want to buy with my profits is now more expensive for some reason.
American consumer: the foreign one used to cost $10 and the domestic one cost $12… now they cost $15 and $14.99. I guess I’ll buy the American one and skip dinner tonight.
To be clear, I think it’s a shit idea and we know (since Elon is running things) the execution will be awful. Tariffs are almost always a shitty idea and will cause nothing but inflation. But that’s the point for Trump. It’s a stealth tax increase.
The only times I think tariffs are good is if:
- Another country is subsidizing an industry with the goal of creating a monopoly on something essential.
- You have an infant industry that’s viable at scale but it needs time and investment to scale up but it’ll be competitive once it does
- Frienemy national security situations with unreliable trade partners (to wildly over-simplify, if you import all your guns and bullets from a frienemy and your exports to them are fancy purses, you probably need a domestic producer of guns and bullets more than they need a fancy purse industry.)
- Something wild like a stupid, unjust war initiated by a madman. But that never happens, right?
But it’s always, in the end, a tax on your citizens and there are almost alway better ways to go about it than tariffs.
