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Hardware companies often operate on a relatively thin margin, especially as compared to say, software companies. Let's say a companies margin was 40%. The cos

Hardware companies often operate on a relatively thin margin, especially as compared to say, software companies. Let's say a companies margin was 40%. The cost of their constituent parts doubles due to tariffs, they are no longer making money as a result. I hope this helps explain it for you.

WalterBright 11mo ago
It's more complicated than that. For example, the company can raise its prices. How well that works depends on whether there is competition for the company's product. If the competition is also hit by the tariffs, then they're on an even playing field. If the competition is using native parts, then the competitor gets the business.
- iancmceachern 11mo ago
  This is one of the great misconceptions. There are often no "native" alternatives. Even the machines that make the chips are nearly all made in one country and then shipped around the world. The amazing, modern nature of our modern world is built on the collective effort and knowledge of humankind globally. Globally.
  - WalterBright 11mo ago
    There's concern that if all our chips come from one country, they could cut the supply off and make demands. That's called an "embargo". It's also done to protect local industries, hence the term "protectionism". For example, Canada's large tariffs on American milk are there to protect the local Canadian milk producers. AFAIK, Trump's tariffs are meant to serve the following purposes: 1. so critical supplies, like chips, will be produced domestically 2. to raise money for the treasury 3. to convince countries that have high tariffs to lower them in exchange for the US to reciprocate in lowering ours 4. to incentivize foreign manufacturers to invest in factories in the US 5. to use them as a negotiating tool for other terms favorable to US interests These are not crazy things. We'll see how things play out.
    - simonh 11mo ago
      They’re not crazy goals, but the way these tariffs are being implemented does not further most of them. 3 and 5 are undermined by the fact that even nations with positive trade surpluses with the US, and countries like Japan with Trump first term negotiated trade treaties (which for Japan included major concessions already) are being hit with these tariffs. 1 and 4 are a problem because many of the inputs into building out US manufacturing capacity come from abroad and are hit by tariffs. Secondly many of the manufacturing inputs into making products in these factories would come from abroad and be tariffed, unless those supplies are bootstrapped domestically first but there is no policy to ensure this. Thirdly as soon as the tariffs go away, these factories would become uneconomical, so they are a gamble on that not happening in the lifetime of the factories. Finally, who’s going to build and operate this huge new manufacturing sector? Infrastructure construction relies heavily on immigrant labour that’s being driven out, so does actual manufacturing, and there are no hordes of unemployed Americans lining up for manufacturing jobs. It’s addressing a problem that largely doesn’t exist, to build out less efficient more expensive ways to make stuff, in a way that can’t work anyway. Manufacturing investment surged in the last few years with the introduction of the CHIPS and Inflation Reduction acts. It’s going to be hard to disentangle the continuing effects of that from the effects of the Tariffs, but it’s hard to see how the Tariffs can have a positive effect.
      - WalterBright 11mo ago
        > but it’s hard to see how the Tariffs can have a positive effect. Any change in policy will make things worse before they get better. For example, if you have surgery to remove a tumor, you'll endure a fair amount of pain and misery before getting better.
    - Teever 11mo ago
      What leads you to believe that the implementation of tariffs under this administration was done for the purposes that you have enumerated? It seems that you're operating under the normally reasonable assumption that these policies were implemented after careful consideration with specific goals in mind. I don't think it's reasonable to assume that the people involved in this are doing what they're doing for well-thought out reasons or ones that are meant to benefit America.
- AnthonyMouse 11mo ago
  > If the competition is also hit by the tariffs, then they're on an even playing field. That assumes the customers are price insensitive. If you're making vintage parts for hobbyists and archivists, maybe they're not; maybe they don't get a raise just because the price went up and your thing is the thing they cut out of the budget when it all won't fit anymore.

WalterBright 11mo ago

It's more complicated than that. For example, the company can raise its prices. How well that works depends on whether there is competition for the company's product. If the competition is also hit by the tariffs, then they're on an even playing field. If the competition is using native parts, then the competitor gets the business.

iancmceachern 11mo ago
This is one of the great misconceptions. There are often no "native" alternatives. Even the machines that make the chips are nearly all made in one country and then shipped around the world. The amazing, modern nature of our modern world is built on the collective effort and knowledge of humankind globally. Globally.
- WalterBright 11mo ago
  There's concern that if all our chips come from one country, they could cut the supply off and make demands. That's called an "embargo". It's also done to protect local industries, hence the term "protectionism". For example, Canada's large tariffs on American milk are there to protect the local Canadian milk producers. AFAIK, Trump's tariffs are meant to serve the following purposes: 1. so critical supplies, like chips, will be produced domestically 2. to raise money for the treasury 3. to convince countries that have high tariffs to lower them in exchange for the US to reciprocate in lowering ours 4. to incentivize foreign manufacturers to invest in factories in the US 5. to use them as a negotiating tool for other terms favorable to US interests These are not crazy things. We'll see how things play out.
  - simonh 11mo ago
    They’re not crazy goals, but the way these tariffs are being implemented does not further most of them. 3 and 5 are undermined by the fact that even nations with positive trade surpluses with the US, and countries like Japan with Trump first term negotiated trade treaties (which for Japan included major concessions already) are being hit with these tariffs. 1 and 4 are a problem because many of the inputs into building out US manufacturing capacity come from abroad and are hit by tariffs. Secondly many of the manufacturing inputs into making products in these factories would come from abroad and be tariffed, unless those supplies are bootstrapped domestically first but there is no policy to ensure this. Thirdly as soon as the tariffs go away, these factories would become uneconomical, so they are a gamble on that not happening in the lifetime of the factories. Finally, who’s going to build and operate this huge new manufacturing sector? Infrastructure construction relies heavily on immigrant labour that’s being driven out, so does actual manufacturing, and there are no hordes of unemployed Americans lining up for manufacturing jobs. It’s addressing a problem that largely doesn’t exist, to build out less efficient more expensive ways to make stuff, in a way that can’t work anyway. Manufacturing investment surged in the last few years with the introduction of the CHIPS and Inflation Reduction acts. It’s going to be hard to disentangle the continuing effects of that from the effects of the Tariffs, but it’s hard to see how the Tariffs can have a positive effect.
    - WalterBright 11mo ago
      > but it’s hard to see how the Tariffs can have a positive effect. Any change in policy will make things worse before they get better. For example, if you have surgery to remove a tumor, you'll endure a fair amount of pain and misery before getting better.
  - Teever 11mo ago
    What leads you to believe that the implementation of tariffs under this administration was done for the purposes that you have enumerated? It seems that you're operating under the normally reasonable assumption that these policies were implemented after careful consideration with specific goals in mind. I don't think it's reasonable to assume that the people involved in this are doing what they're doing for well-thought out reasons or ones that are meant to benefit America.
AnthonyMouse 11mo ago
> If the competition is also hit by the tariffs, then they're on an even playing field. That assumes the customers are price insensitive. If you're making vintage parts for hobbyists and archivists, maybe they're not; maybe they don't get a raise just because the price went up and your thing is the thing they cut out of the budget when it all won't fit anymore.