8 ms·

Tariffs are just a tax. Similar to a sales tax, but it needs to be paid on import. To be clear, it's a tax on your own citizens, not foreign exports. If a prod

by bux93 2y ago

Tariffs are just a tax. Similar to a sales tax, but it needs to be paid on import. To be clear, it's a tax on your own citizens, not foreign exports. If a product is cheaply produced in another country, and your domestic industry cannot match that price, your domestic industry might disappear. Suppose that other country is subsidizing their industry, then it's quite unfair, and it legitimizes supporting your own industry either by your own subsidies or retaliatory tariffs. As they say, to level the playing field. If the domestic industry is already dead, tariffs won't magically resurrect it. For example, building a chip industry can take billions of dollars in investments and years of development. All that time, those taxes are basically just costing consumers money. They need to be kept in place up until the new factories come online AND are paid off. This can take decades. Will those tariffs still be there? Will those other countries have ALSO invested? Those uncertainties make it hard to invest in a dead/dying industry, even with tariffs in place. One feature of tariffs is that it's a tax on consumption, so it's ultimately paid by consumers, and it's a regressive tax; the wealthiest will pay the smallest ratio of their income and/or wealth, while the working Joe will just see stuff getting more expensive - especially in the short term. Tariffs can work to retaliate against, and discourage, dumping. They can play a role in protecting vital industries. But arbitrarily imposing them for political points is a dangerous gambit.

cudgy 2y ago
“One feature of tariffs is that it's a tax on consumption, so it's ultimately paid by consumers, and it's a regressive tax; the wealthiest will pay the smallest ratio of their income and/or wealth, while the working Joe will just see stuff getting more expensive - especially in the short term.” I don’t think it’s this simple. The wealthy fat cats that are making money producing their stuff overseas or simply operating as middlemen for overseas manufacturers are going to have a reduction of income and profits. Furthermore, it depends on how the revenue from tariffs were used. If revenue from tariffs is used to lower taxes for lower income citizens, it would be effectively a progressive tax.
- GlassOwAter 2y ago
  They won’t be using tariffs to lower taxes for lower income citizens. Tax cuts for the rich have already been proposed.
  - cudgy 2y ago
    Sure, but how is this any different than the income tax system where companies receive tax credits, reduced tax rates, accelerated depreciation, schedules, subsidies to build factories, and direct cushy (high margin and sometimes fraudulent) contracts from government divisions.
- svnt 2y ago
  Middlemen for overseas manufacturers are not typically what comes to mind when I hear “wealthy fat cats.” If all the middlemen see the same increase in costs, they are not going to be the one to try to keep prices the same. They know everyone is taking the same hit so they can just pass it along together. The consumer decides to buy or not at that level. The innovation comes in avoiding the tariff. Often companies with sufficient scale of operations can pay additional lawyers and accountants to restructure and avoid tariffs. Tariffs can dramatically affect specific companies, but squishy middlemen (and multinationals) can often work around them.
- scottbez1 2y ago
  I run a tiny (<$30k annual revenue and much much smaller profit, or negative if I paid myself an hourly wage) side business that relies on custom manufacturing of open source hardware products I've designed. So very much not a "wealthy fat cat" - here's my experience with manufacturing: For die-cut plastic cards (think custom-shaped gift cards or hotel door hangers), I reached out to several US manufacturers for quotes and most never even responded. The one that did respond basically laughed at me and said my design was impossible to cut. So I went on Alibaba and had tons of quotes instantly and found a manufacturer. Not one of the responses were concerned about the design's manufacturability. And the manufacturer I picked does an incredible job with what is admittedly a challenging die cut design. As a tiny business, most of my orders end up being under de minimis (which is actually great for helping small businesses avoid the overhead of dealing with tariffs and level the playing field against large players that can be much more efficient at handling regulatory overhead through high volume). But with the change to eliminate de minimis and increase tariffs another 10% essentially overnight, my COGS is going to increase ~30%, which means either I shut down my business due to losing nearly all of my margin, or I increase prices substantially. It just hurts consumers AND small businesses like mine in the US. There isn't a US manufacturer I can switch to (again, price wasn't the issue). And the US manufacturers in the space that WERE still selling products despite the international competition will just increase their prices now that competition is more expensive.
mikewarot 2y ago
> For example, building a chip industry can take billions of dollars in investments and years of development. Worse than that... you also need all the other things in the "ecosystem" that support them chips, such as discrete components, circuit board fabrication, assembly, etc.
- geerlingguy 2y ago
  And the most important bit, people who can staff the plants and operate the machinery required.
  - ahoka 2y ago
    And divesting capital and workers from other industries that might benefit the country more.
- marcosdumay 2y ago
  Yes, and if the tariffs are indiscriminate, all of those things will be more expensive, making a domestic industry less competitive, for no good reason.
petre 2y ago
Also tariffs are paid upfront when the goods leave the customs. Sales tax is paid only when the goods are sold to the final consumer.

by bux93 2y ago

cudgy 2y ago

“One feature of tariffs is that it's a tax on consumption, so it's ultimately paid by consumers, and it's a regressive tax; the wealthiest will pay the smallest ratio of their income and/or wealth, while the working Joe will just see stuff getting more expensive - especially in the short term.” I don’t think it’s this simple. The wealthy fat cats that are making money producing their stuff overseas or simply operating as middlemen for overseas manufacturers are going to have a reduction of income and profits. Furthermore, it depends on how the revenue from tariffs were used. If revenue from tariffs is used to lower taxes for lower income citizens, it would be effectively a progressive tax.

GlassOwAter 2y ago
They won’t be using tariffs to lower taxes for lower income citizens. Tax cuts for the rich have already been proposed.
- cudgy 2y ago
  Sure, but how is this any different than the income tax system where companies receive tax credits, reduced tax rates, accelerated depreciation, schedules, subsidies to build factories, and direct cushy (high margin and sometimes fraudulent) contracts from government divisions.
svnt 2y ago
Middlemen for overseas manufacturers are not typically what comes to mind when I hear “wealthy fat cats.” If all the middlemen see the same increase in costs, they are not going to be the one to try to keep prices the same. They know everyone is taking the same hit so they can just pass it along together. The consumer decides to buy or not at that level. The innovation comes in avoiding the tariff. Often companies with sufficient scale of operations can pay additional lawyers and accountants to restructure and avoid tariffs. Tariffs can dramatically affect specific companies, but squishy middlemen (and multinationals) can often work around them.
scottbez1 2y ago
I run a tiny (<$30k annual revenue and much much smaller profit, or negative if I paid myself an hourly wage) side business that relies on custom manufacturing of open source hardware products I've designed. So very much not a "wealthy fat cat" - here's my experience with manufacturing: For die-cut plastic cards (think custom-shaped gift cards or hotel door hangers), I reached out to several US manufacturers for quotes and most never even responded. The one that did respond basically laughed at me and said my design was impossible to cut. So I went on Alibaba and had tons of quotes instantly and found a manufacturer. Not one of the responses were concerned about the design's manufacturability. And the manufacturer I picked does an incredible job with what is admittedly a challenging die cut design. As a tiny business, most of my orders end up being under de minimis (which is actually great for helping small businesses avoid the overhead of dealing with tariffs and level the playing field against large players that can be much more efficient at handling regulatory overhead through high volume). But with the change to eliminate de minimis and increase tariffs another 10% essentially overnight, my COGS is going to increase ~30%, which means either I shut down my business due to losing nearly all of my margin, or I increase prices substantially. It just hurts consumers AND small businesses like mine in the US. There isn't a US manufacturer I can switch to (again, price wasn't the issue). And the US manufacturers in the space that WERE still selling products despite the international competition will just increase their prices now that competition is more expensive.

mikewarot 2y ago

> For example, building a chip industry can take billions of dollars in investments and years of development. Worse than that... you also need all the other things in the "ecosystem" that support them chips, such as discrete components, circuit board fabrication, assembly, etc.

geerlingguy 2y ago
And the most important bit, people who can staff the plants and operate the machinery required.
- ahoka 2y ago
  And divesting capital and workers from other industries that might benefit the country more.
marcosdumay 2y ago
Yes, and if the tariffs are indiscriminate, all of those things will be more expensive, making a domestic industry less competitive, for no good reason.

petre 2y ago

Also tariffs are paid upfront when the goods leave the customs. Sales tax is paid only when the goods are sold to the final consumer.