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
>The R’s are saying increased tariffs won’t cause manufacturers/distributors to pass the costs onto consumers here in the US.
Increased costs are *always* passed on to the consumers. See also: the entire history of everything, always.
The point of a tariff is to make a foreign product cost more to US consumers so they will buy US-made goods instead, without US producers needing to lower their prices to match foreign goods.
US consumers will either have to pay the cost of the tariff when they buy those foreign goods (or higher prices on US goods made using foreign supplies or parts), or the importer will give up importing them entirely because not enough people will pay the higher price – which means US consumers must pay for US-made goods at a higher prices instead.
One way or the other, US consumers pay for tariffs imposed on foreign products. The whole point of a tariff is to keep prices high to benefit US businesses that are competing with foreign ones that charger lower prices.
To answer your question, yes. It’s also happened.
If china wants to sell us a TV for 100 dollars, then has a 10% tariff tax applied to it, then China will then sell us what was a 100 dollar TV for 110, passing the tax onto consumers.
Then in retaliation, other countries can apply tariffs to us as well. It’s been a problem in the past.
Tariffs are a method governments use to protect products made in that country. The people in your country raise wheat, but so does another country, and their wheat is cheaper or better, so the government puts a tariff on foreign wheat to raise the price making the foreign wheat less desirable hence people buy domestic wheat. The key here is that the tariff raises the prices of foreign wheat.
Tariffs are taxes on imported or exported goods. They are traditionally used to protect domestic industries.
For example you could charge a tariff on foreign made cars, this makes their price artificially higher encouraging people to buy domestic cars which are now cheaper by comparison. This helps create and protect jobs in your country and reduces dependence on foreign goods.
The problem is that countries really don’t like it when you do that and often implement their own *retaliatory tariffs*. Japan for example might respond to a US tariff on cars by charging a tariff on US made goods encouraging Japanese citizens to buy domestic or European made goods instead.
This gets interesting when another country controls the raw materials. Canada for example could retaliate to proposed Trump tariffs by charging tariffs on metal and wood exports, badly hurting the US economy in the process.
This then hurts US industries and consumers, and those industries put pressure on the US government to fix it.
Tariffs can also result in US based companies increasing prices on their goods due to shortages as imports slow, or because they know they can get away with raising prices compared to foreign goods.
Generally speaking tariffs are an important economic tool, but in a our global economy they cannot be wielded like a hammer to solve all of our problems.
Domestic industries can be supported instead with tax cuts and incentives to help them develop, grow, or lower prices. (although in practice this too tends to just lead to more profits in the hands of their shareholders)
that’s them telling you what you want to hear not reality.
Tariffs are imposed on imports, not exports. The entire concept of them is to make it more costly to bring things into the country vs. doing business with a producer who is already in the country.
In a simple ELI5, say you sell hats wholesale for $10. But I could just buy them from China for $8. A $2/hat tariff would equalize the cost and there would be no point in importing them from China anymore so I’d buy them from you instead.
Now, ignoring reality……..this “doesn’t increase costs to US consumers” because this price hike only applies to foreign goods. Back to reality…….if you shrink the market by reducing the imports of Chinese hats, it puts more burden on US suppliers and THAT will mean that costs go up.
Further (again the intent of tariffs being reducing imports) that cuts into revenues of the import/export business and logistics companies (who may be US based) so now they raise their rates on domestic shipping to offset it and it costs you more to make your hats……….on top of the increasing burden of meeting your demand.
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.
Some trade is tariff free, there are lots of these agreements most of which the Republicans in general and Donald in particular want to ditch North American Free Trade Agreement or NAFTA being one. So that exporters and importers don’t face additional costs when crossing borders, free trade in general means more trade which is generally good for business, the issue comes where one country becomes very good at producing one item and politicians fear for jobs in that sector in their country or region, this then leads to protectionism and tariffs which are generally bad for business. https://youtu.be/nI5Ckw4CtsY
Did we forget the effects of tariffs and how hard it was to get items?
There has been no cases, in any point in history, where an increase in cost HASN’T been passed on to the customers. This will be no different.
Anyone trying to claim otherwise is either a fool or acting with bad intent.
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