how do tariffs on exports work. The R’s are saying increased tariffs won’t cause manufacturers/distributors to pass the costs onto consumers here in the US. I was wondering if American manufacturers follow that same model. Are goods exported to foreign countries outside the US subject to tariffs, and are those tariffs absorbed, or passed onto foreign consumers?
In: Economics
Two things –
Imports – it will literally be 20% (or whatever value) more expensive to bring things into the US. This means those goods will be similarly more expensive on the stands OR they will not be sold as frequently and replaced instead by internally produced goods.
For some stuff this is more realistic than others, and also takes into account how prepared we are to replace those goods – ie for a lot of manufacturing or production we are not that well prepared, so basically we need to export and will eat those costs.
Exports – other nations will place these on our goods. The cost is not paid by producers directly (or US consumers), but will be paid on import at the destination port. Meaning – other markets may either have to pass the cost on to their consumers, or opt to replace with their own local products.
Like the Import path – this takes into account how well other countries (ie China) are established to better meet their own internal needs. Probably better than we are, for most goods, frankly. Or they’d at least have alternate options – ie Brazil for produce.
The net is generally – more expensive goods in the short term as these are major economic adjustments to work through and don’t happen overnight. And this can mean inflation but also loss of economic opportunity in some sectors as they shrink due to a shifting demand reality (ie as they get cut off from markets).
Long term, maybe you have a re-alignment to more localized production in both places – which is why tariffs existed in the first place, effectively to protect local industry from the influence of external actors. This can arguably be a positive but again, would need us to ramp up capacity to satisfy the population at a similar level as 50 years of globalization have grown to accomodate. Likely that doesn’t happen overnight.
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