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
Hi, I’m the president of France.
I want people to buy French cars because, when they buy a US car, that money goes to the US. If they bought more French cars, our country would be richer. But US cars are popular. How can I convince more French people to buy French cars?
Aha! They would buy more French cars if US cars were much more expensive because everyone likes saving money. Now, how do I make that happen?
I can’t order US car companies to raise prices… but I *can* demand those companies pay my government a fee for every US car sold here in France. I’ll call it a tariff, and it’s a kind of tax since people pay money to the gov’t. I’ll set it to… let’s say 30%. US cars cost the normal amount plus an extra 30%.
Will the US gov’t pay that? Nope, they’re not involved. Will the US car companies pay that and keep prices the same? No, because then they’re earning less on each. Instead, they increase the customer’s cost of buying a US car by that tariff rate. A US car costing a French person $20K would now cost $26K (in France), so more French people would be interested in buying French cars to save money.
>The R’s are saying increased tariffs won’t cause manufacturers/distributors to pass the costs onto consumers here in the US.
PS: These same R’s are also saying we cannot raise the minimum wage because businesses will pass the costs onto consumers here in the US.
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