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> 'm going to raise my prices to cover the additional expense. Only if the market will bear such expense. If your product sells at $100 and the tariff is $15,
by jgalt212 2y ago
> 'm going to raise my prices to cover the additional expense.
Only if the market will bear such expense. If your product sells at $100 and the tariff is $15, what makes you think the importer will be able to sell the same number of units at new price of $115? Depending on the demand, the $15 cost will be born by a combo of the importer and consumer.
- fatbird 2y agoWell, yes, that's the point: it doesn't matter who pays up front, it affects the supply/demand equation, typically hurting everyone. Regardless of where I am in the chain, I'm not going to run at a loss and hope to make it up in volume.
- jgalt212 2y agoIt doesn't hurt the government, though. The first order effect is new tax revenues they don't have to source elsewhere.
- fatbird 2y agoAs you pointed out, demand will drop, so there's fewer sales, and it drives inflation, slowing the economy, leading to (ultimately) a reduction in revenue all around. Also, it's basically a heavy sales tax, since it's through purchasing that's it's implemented, and sales taxes are always regressive (the poor spend all their money on consumables, the rich spend only a portion, so the poor pay more proportionate to their income). There's a reason no economist these days is in favour of tariffs.