It's an old attitude from "classical" economics, that tariffs are always passed on to the customer. But if you analyze that situation, it turns out it can only be true if there is no profit margin at all, and all costs must be recovered by the sale price, or if the profit margin is inflexible because it is so thin. If the profit margin is large, as it seems to be with many trade items, then it becomes a trade-off: pass the tariff onto the customer in order to maintain profit margin, but have a reduced market share---or eat some or all of the tariff, resulting in a reduced profit margin, but maintain market share.
Fresh Thyme just raised the price of my organic Guatemalan coffee beans by $5/lb. Businesses in my area aren’t eating any of the tariffs…everything is continuing to increase. Not a fan of tariffs at the moment.
It will be quite a while before I can consider buying a newer Jaguar again. The possible upside to this may be the contraction of the market in addition to the atrocious new design style being promoted. I think I can predict that no former Jaguar owner would be interested in buying something that looks (at best) like a bar of soap. That much market contraction may compel Jaguar to reconsider its nouveau approach and return to its traditions.
This is far from over. If Trump succeeds in establishing External Revenue as the funding engine for government and abolishes Internal Revenue, our incomes will increase. If he manages to get us off fiat money into gold/silver-backed currency, our dollar will increase in value relative to foreign currency, bringing exchange prices down.
There's also the fact that many governments subsidize their large exporters, as a way of buying votes. If their exports decrease, unemployment increases, so their tax base and their own political support plummet, all while the liabilities on their social safety net skyrocket. They're in a bad negotiating position to start with.
I love these tariff buy down deals. Give the US a crap load of money and we will only tax you X amount on everything that you sell us.
It's an old attitude from "classical" economics, that tariffs are always passed on to the customer. But if you analyze that situation, it turns out it can only be true if there is no profit margin at all, and all costs must be recovered by the sale price, or if the profit margin is inflexible because it is so thin. If the profit margin is large, as it seems to be with many trade items, then it becomes a trade-off: pass the tariff onto the customer in order to maintain profit margin, but have a reduced market share---or eat some or all of the tariff, resulting in a reduced profit margin, but maintain market share.
Fresh Thyme just raised the price of my organic Guatemalan coffee beans by $5/lb. Businesses in my area aren’t eating any of the tariffs…everything is continuing to increase. Not a fan of tariffs at the moment.
It will be quite a while before I can consider buying a newer Jaguar again. The possible upside to this may be the contraction of the market in addition to the atrocious new design style being promoted. I think I can predict that no former Jaguar owner would be interested in buying something that looks (at best) like a bar of soap. That much market contraction may compel Jaguar to reconsider its nouveau approach and return to its traditions.
This is far from over. If Trump succeeds in establishing External Revenue as the funding engine for government and abolishes Internal Revenue, our incomes will increase. If he manages to get us off fiat money into gold/silver-backed currency, our dollar will increase in value relative to foreign currency, bringing exchange prices down.
There's also the fact that many governments subsidize their large exporters, as a way of buying votes. If their exports decrease, unemployment increases, so their tax base and their own political support plummet, all while the liabilities on their social safety net skyrocket. They're in a bad negotiating position to start with.