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Let’s say I’m a widget seller in the US, and my widgets cost $100 to import from Switzerland before tariffs. I retail them at $150 USD in the US, but I sell int

Let’s say I’m a widget seller in the US, and my widgets cost $100 to import from Switzerland before tariffs. I retail them at $150 USD in the US, but I sell internationally. In the UK for example, I retail them at £113 (simple conversion, obviously it doesn’t really work like this). Now tariffs are imposed, my import cost per widget is $139. Not only do I have to jack up my US price to $189, I have to jack up my UK price to £142, meaning UK customers are also paying the tariff now. Even if you’re a bit smarter about your logistics and use an FTZ or drawback against the import duties, imagine you sell two widgets, one where you don’t pay import duties (bound for the UK) and one where you do (remaining in the US). Your total cost to import is $239. Instead of making your US customers eat all the cost of the tariff, you might instead adjust your retail prices to $170 and £128 respectively. Again, now your British customers are paying an increased price due to the tariffs.

amanaplanacanal 1y ago
That only works if you have no competition in the UK. Why would your customers there continue to buy from you when you are now more expensive than the competition? Edit: for that matter, if you could raise your prices without losing any customers, why did you wait for the tarrifs? You should have already done it.
- d1sxeyes 1y ago
  Ok, so I should have said that I make gizmos which depend on Swiss widgets, I’m not just round-tripping Swiss widgets through the US, I’m adding some value somewhere. I didn’t say I wouldn’t lose any customers. I probably will, but this way I probably lose the fewest.
- torginus 1y ago
  True, and this is extremely important with cars, where China, the main upcoming competitor of established brands, is banned from the US markets.
jopsen 1y ago
It's very likely that for luxury items the price is what people are willing to pay. And it's adjusted for each country accordingly. Thus, the change may simply be that profit margin for sales into the US drops (or rather than it skews that way). But there are still many commodities where you're not pricing the product based on branding. These commodities will likely still have the same price on the international market. And thus, consumers in the US will see the effects of tariffs in the price. Such commodities could be finished goods, but also parts, machines or feedstock for industry in the US. I'd also guess that if you look at what middle class people buy, these commodities make up a larger percentage of the expenditure -- than it does for wealthy people. Making tariffs a very regressive tax. Most people won't care about the price of luxury watch. But most people will buy aluminum cans, etc.
immibis 1y ago
Switzerland would sell the same widgets to the UK for much less, since they wouldn't be hit by the tariffs and also wouldn't be paying to ship Europe->America->Europe.
- d1sxeyes 1y ago
  Ok, so I should have said that I make gizmos which depend on Swiss widgets, I’m not just round-tripping Swiss widgets through the US, I’m adding some value somewhere.
carlosjobim 1y ago
[flagged]
- kryptiskt 1y ago
  They don't sell for the highest possible price, because sales would suffer, they try to sell for the price point that brings them most profit. Adding tariffs will change the point of maximum profit upwards, drastically so for low margin goods.
  - carlosjobim 1y ago
    Companies sell for the highest price they can without losing more sales than it's worth, exactly as you say. I thought it was such common knowledge as not needing to be mentioned. Adding tariffs means that you might have to lower your profit margins to remain competitive or that you will have to stop exporting to that nation completely, or start manufacturing in that nation. Which is the purpose of tariffs.
- Tenemo 1y ago
  So what you are saying is that no company has raised prices for any product after tariffs had gone live? That's easily proven to be false (https://taxfoundation.org/blog/trump-tariffs-raise-prices-consumers/ https://taxfoundation.org/blog/trump-tariffs-raise-prices-co...). Going by your logic, tarrifs would have always no impact on consumers, even e.g. 300% tariffs?

amanaplanacanal 1y ago

That only works if you have no competition in the UK. Why would your customers there continue to buy from you when you are now more expensive than the competition? Edit: for that matter, if you could raise your prices without losing any customers, why did you wait for the tarrifs? You should have already done it.

d1sxeyes 1y ago
Ok, so I should have said that I make gizmos which depend on Swiss widgets, I’m not just round-tripping Swiss widgets through the US, I’m adding some value somewhere. I didn’t say I wouldn’t lose any customers. I probably will, but this way I probably lose the fewest.
torginus 1y ago
True, and this is extremely important with cars, where China, the main upcoming competitor of established brands, is banned from the US markets.

jopsen 1y ago

It's very likely that for luxury items the price is what people are willing to pay. And it's adjusted for each country accordingly. Thus, the change may simply be that profit margin for sales into the US drops (or rather than it skews that way). But there are still many commodities where you're not pricing the product based on branding. These commodities will likely still have the same price on the international market. And thus, consumers in the US will see the effects of tariffs in the price. Such commodities could be finished goods, but also parts, machines or feedstock for industry in the US. I'd also guess that if you look at what middle class people buy, these commodities make up a larger percentage of the expenditure -- than it does for wealthy people. Making tariffs a very regressive tax. Most people won't care about the price of luxury watch. But most people will buy aluminum cans, etc.

immibis 1y ago

Switzerland would sell the same widgets to the UK for much less, since they wouldn't be hit by the tariffs and also wouldn't be paying to ship Europe->America->Europe.

d1sxeyes 1y ago
Ok, so I should have said that I make gizmos which depend on Swiss widgets, I’m not just round-tripping Swiss widgets through the US, I’m adding some value somewhere.

carlosjobim 1y ago

[flagged]

kryptiskt 1y ago
They don't sell for the highest possible price, because sales would suffer, they try to sell for the price point that brings them most profit. Adding tariffs will change the point of maximum profit upwards, drastically so for low margin goods.
- carlosjobim 1y ago
  Companies sell for the highest price they can without losing more sales than it's worth, exactly as you say. I thought it was such common knowledge as not needing to be mentioned. Adding tariffs means that you might have to lower your profit margins to remain competitive or that you will have to stop exporting to that nation completely, or start manufacturing in that nation. Which is the purpose of tariffs.
Tenemo 1y ago
So what you are saying is that no company has raised prices for any product after tariffs had gone live? That's easily proven to be false (https://taxfoundation.org/blog/trump-tariffs-raise-prices-consumers/ https://taxfoundation.org/blog/trump-tariffs-raise-prices-co...). Going by your logic, tarrifs would have always no impact on consumers, even e.g. 300% tariffs?