3 ms·
The problem is that margins in manufacturing are usually in the single digits. So you can’t really sustain eating a 10% tariff, to say nothing of a 25% tariff,
by toasterlovin 7y ago
The problem is that margins in manufacturing are usually in the single digits. So you can’t really sustain eating a 10% tariff, to say nothing of a 25% tariff, for that long. Money doesn’t grow on trees. You either have to borrow to cover the tariff or pay out of savings. At some point you run out of money or your creditors come to think that you will.
- grizzles 7y agoIt depends on the industry but margins in manufacturing are often enormous. I once worked in a factory making action figures. We could make a few dozen for under a penny in energy and material costs. Those sold for ~$19.99 each. It turns out that all the cost is in marketing and distribution. And for asian manufacturers the internet era has decreased those costs a ton. They can outsource them to eg. western youtube price arbitragers and focus completely on volume to maximize their government subsidy.
- toasterlovin 7y agoBut the action figure factory was not Mattel, right? They were a contract manufacturer that companies like Mattel source from. If they try and reduce their prices to Mattel by 10-25% to counteract tariffs then it’s going to hurt bad, because they don’t have 25% margins. They have <10% margins.