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
EDIT: just realized this should be simplified based on the sub.
I’m selling lemonade for $.50 a cup, it only costs me $.10 a cup to make so I’m super happy about that. A bully comes by and threatens to beat me up unless I give him $1 a cup. I don’t want to get beat up but I can’t afford to pay him as I’d be losing money plus I did the math and I need that profit to buy a Fornite skin that will be gone after this week. So I sell the lemonade for $1.50 to pay off the bully and still keep my profit.
Original comment: Trump’s proposed tariff is on foreign produced imports. So there are 2 results which are economically proven by looking at history
1. Manufacturers pass any increased cost to the consumer, including tariffs. This is by design as…
2. The goal is to increase the cost of a foreign made good in the hopes of making domestic products more appealing driving in investment in local manufacturing.
Now one might look at that and think Trump has the right idea, but only looking at a very high level. Trump points to the Chinese EV tariff as proof he’s on the right track as the Biden admin kept them in place but fails to mention the additional actions the Biden admin has put in place to incentivize domestic manufacturing. And the big reason this is working at all is it is a brand new industry.
Tariffs across the board where there is no domestic alternate only increase consumer prices which based on the amount of US imports will drive inflation up very quickly. On top of that, any country targeted across the board would in turn put tariffs on US goods or see them straight up turning to other markets as they did with soy beans back in 2018.
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