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
Tariffs are on IMPORTS, not exports.The idea behind tariffs is to raise the price of goods from overseas to protect a domestic industry. Typically, a country wants to protect its own producers because the foreign competitors either have government subsidies or lower production costs.
If the item subject to tariffs is a part in a product, then the manufacturing costs go up. The manufacturer will raise prices. For example, if a car company was buying screws from China for 4 cents each, but with the tariff, they cost 8 cents, and there are 200 screws, the cost of manufacturing the car went up $8. The car company can eat the $8 or raise the price. But if the article is a battery with $400 tariff, the company may pass the cost.
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