Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Tariffs are indeed taxes. That's the only thing the OP got correct. The OP got a 1 out of 4 on the test.
They are paid by people. As with ALL taxes, they are borne by actual people. The question is which people? It all depends on the price elasticity of demand and the price elasticity of supply (the slopes of the respective demand and supply curves).
X% of the tariffs are borne by customers (in the USA) in the form of prices higher than they otherwise would be
Y% of the tariffs are borne by employees (in China) in the form of compensation lower than it otherwise would be especially in the form of fewer hours worked (in China) and layoffs (in China) because of lower production induced by lower US demand
Z% of the tariffs are borne by business owners (in China) in the form of profits lower than they otherwise would be, where in China the owners are frequently proxies for the Chinese government
... where X% + Y% + Z% = 100%.
There are secondary effects. For example, at the margin, in the USA a customer might decide not to purchase a widget because the price is now higher than she's willing to pay. As a result, she now has more money left in her wallet. She might spend that money on something else. She might save that extra money, and since in aggregate savings=investments, that means she's invested more for the future.
Well, I suspect China will take a much simpler approach. They'll just charge $1.35 for their $1.00 object, hand over the 25% tariff, and make 2 cents on the deal.
Well, I suspect China will take a much simpler approach. They'll just charge $1.35 for their $1.00 object, hand over the 25% tariff, and make 2 cents on the deal.
You realize you completely missed the point of the OP, this thread and reality?
Trump's tariffs make no sense when we are at full employment. Ricardo's comparative advantage theory: in free trade, nations export what they are most efficient and productive at, while importing things they are not.
Consider Bob, a skilled CNC operator at a plant who makes $30/hour. Boss offers him an hour of overtime, worth $45/hour. Bob's choices are: decline the overtime and go home and make dinner, or accept the overtime and buy a pizza after work for $15. If Bob declines the overtime he is trading away his high-value labor to do low-value labor (cook at home). If he accepts the overtime he is "importing" a low value good (the pizza). Of course the right choice is to work the overtime because he comes out ahead $45 minus $15 = $30.
And so what Trump wants us to do is downgrade our labor from higher value (what we are doing now) to lower value (what the Chinese are exporting to us). We're at full employment so the only way to staff the lower value jobs is to recruit workers from the higher value jobs. How many $30/hour office "knowledge" workers, computer programmers, etc. will want to quit to go work at a newly opened U.S. textile mill for $10/hour?
Again, it makes no sense why Trump wants the U.S. to stop doing high value work and downshift to lower value tasks.
I used to work as a machinist and CNC operator. There is far less "BOB" because Bob's job got sent overseas a decade ago and Bob is living in government assisted housing on food stamps. I saw the writing on the wall and changed careers.
MAYBE, Bob will have a job again because lower corporate taxes combined with tariffs make it economically viable for a company to make parts in the USA again, getting "Bob" back to work. Those still with their jobs, are now able to get pay increases as US production increases and demand for workers like Bob grows.
MAYBE, Bob will have a job again because lower corporate taxes combined with tariffs make it economically viable for a company to make parts in the USA again, getting "Bob" back to work. Those still with their jobs, are now able to get pay increases as US production increases and demand for workers like Bob grows.
More likely, B.O.B. will be the chummy acronym for the AI system that runs the CNC machine.
Jobs are not coming back to the US. All that geoeconomic gamesmanship is going to accomplish is to compress or extend the timeline for further job losses.
Well, you can put it that way, but it goes way beyond fake tupperware and cheap shirts. We've spent 30 years building a global economy; even if you somehow disagree with that approach, you can't arbitrarily slam the doors and pretend it's 1955 all of a sudden.
A lesson both the US and UK seem hell-bent on failing.
That's what Trumpism is all about. 40% of Americans want 1955 back.
That's what Trumpism is all about. 40% of Americans want 1955 back.
I would love for the 50's economy to come back. We exported things not money. Lots of good jobs available to anyone willing to work. Match that to cheap real estate and homes within close proximity to major job centers and little traffic. The list goes on.
Tariffs are indeed taxes. That's the only thing the OP got correct. The OP got a 1 out of 4 on the test.
They are paid by people. As with ALL taxes, they are borne by actual people. The question is which people? It all depends on the price elasticity of demand and the price elasticity of supply (the slopes of the respective demand and supply curves).
X% of the tariffs are borne by customers (in the USA) in the form of prices higher than they otherwise would be
Y% of the tariffs are borne by employees (in China) in the form of compensation lower than it otherwise would be especially in the form of fewer hours worked (in China) and layoffs (in China) because of lower production induced by lower US demand
Z% of the tariffs are borne by business owners (in China) in the form of profits lower than they otherwise would be, where in China the owners are frequently proxies for the Chinese government
... where X% + Y% + Z% = 100%.
There are secondary effects. For example, at the margin, in the USA a customer might decide not to purchase a widget because the price is now higher than she's willing to pay. As a result, she now has more money left in her wallet. She might spend that money on something else. She might save that extra money, and since in aggregate savings=investments, that means she's invested more for the future.
You have a lot of companies here that are factory owned by China that act as the USA importers ..... so in that case it is China paying the tariffs since they own the importer ....
On the other hand many importers are American owned businesses... it is like I am a Siemens control and technology distributor ... Siemens USA is a separate American company that has sole import rights in the states ....they buy everything from Siemens that they stock and sell to distributors like us ...
In those cases if they were dealing with a Chinese company they would be paying those tariffs .... in the end it will cost us you can count on that
Last edited by mathjak107; 05-13-2019 at 04:21 PM..
In those cases if they were dealing with a Chinese company they would be paying those tariffs .... in the end it will cost us you can count on that
The truly quaint theory of tariffs is that paying par or higher prices for imported goods will drive buyers (especially manufacturers) to buy domestic goods.
Except in limited ways, that not only isn't going to happen this round, but simply can't for many goods. There aren't US makers of many of these products, at least not at the same competition level. See: washing machines.
So the sole real effect will be to funnel a very large amount of US dollars - which originate with individuals - to government coffers, for no (AFAIK) defined purpose. That all the tax-loathing trumpista think this is a good idea is just boggling.
Tony Soprano for Prez 2020: "We Need a REAL Shakedown Artist!"
The reality is anytime the competition raises prices , like the tariffs would cause , if the tariffs are 25% the other suppliers will raise prices 20% even though no tariffs are charged on their products ... money loves a vacuum .......we get hammered as the consumer from all the suppliers ....
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
