This reminded me of an earlier headline I had read about "16 Nobel-Prize winning economists signing a letter saying that the economic policies put forth by the Republic party would ignite inflation again".
baron816 · 3h ago
In a sane political system, we would’ve raised taxes (across the board). That would’ve slowed down consumption and allowed the Fed to lower interest rates, which would’ve raised investment. It also would’ve reduced the deficit, which would also be good for long term economic health.
Instead, we blew up the deficit and lowered taxes (but only for the really rich).
So many problems and social angst is downstream of expensive housing. Higher interest rates, fewer laborers, and more expensive building supplies (due to tariffs) is just making the housing crisis worse.
Oh and just wait until the Fed’s independence is completely gone. Our economy is galloping towards Peronism. Favored groups get economic benefits. Inflation is out of control. Competitiveness is gone. Capital flight. Rapid erosion of quality of life. It won’t be fun.
tastyfreeze · 3h ago
What a wonderful success the Federal Reserve redefinition of "inflation" has been. We will never get anywhere if everything that causes price increases is called inflation. Inflation is an increase in the money supply which also happens to increases prices.
Everything has trade offs. Diluting the dollar increases prices for nothing in return. Pretty much all downside for everybody but the top. Tariffs increase prices to the benefit of domestic producers and benefits everybody.
What we will see is if prices are more important than building skills and wealth of our fellow citizens.
jaredklewis · 1h ago
> Inflation is an increase in the money supply which also happens to increases prices.
This is not a definition I have seen used by academic or working economists. If the purchasing power of $1 decreases, we can say there has been inflation. Even if the money supply is constant, if shirts used to cost $10 but now cost they cost $100 due to increased demand, a supply shock, a union strike, a tax, or a speculative shirt buying bubble, it would be considered inflation in all of those cases, regardless of the cause.
It sounds like you mean monetary inflation, but the fed’s mandate is not to control monetary inflation (which would be a lot simpler) but to ensure stable prices. The mandate has no exception for non-monetary causes of price instability.
Of course measuring how much a dollar can purchases is an enormously complex and subtle task that can be approached in many different ways. But the whole argument for tariffs is that foreign producers of goods are selling them so cheaply that American producers cannot compete. So if we increase the price of those foreign goods by adding a tax on it and shift some good consumption to more expensive American producers, that’s obviously going to reduce what a dollar can purchase.
kergonath · 2h ago
> Tariffs increase prices to the benefit of domestic producers and benefits everybody.
Not necessarily, and there are plenty of examples around the world of tariffs that do not do that, but instead cripple the economy. Tariffs are just one aspect. If the domestic supply is not there for one reason or another, you have the worst of both worlds, with high prices and still no re-industrialisation.
You need companies to be reasonable confident that they’ll be making money next year, and you need the situation to be stable enough to let people invest to make it happen. You need those people to be confident enough that they won’t just be crushed by a president’s friend who has more access to power than they have. You need rule of law and due process. Not a kleptocratic oligarchy.
Otherwise you’re just sawing off your leg to repair a broken ankle.
analognoise · 1h ago
> Tariffs increase prices to the benefit of domestic producers and benefits everybody.
I think tariffs are a regressive tax brought on by the most economically illiterate administration in living memory.
> What we will see is if prices are more important than building skills and wealth of our fellow citizens.
So instead of it being on the shoulders of the “wealthy job creators” who definitely earned it all fair and square and should keep every penny, it’s now on the poor and the average citizen?
These are just regressive policies that lead to outright social unrest , and a horrific distribution of wealth.
mlinhares · 5h ago
Wait, Lutnick said tariffs would lower the prices, this can't be real.
janice1999 · 1h ago
If only he could seek the financial wisdom of the former owner of his home and his long time neighbor, adviser to the rich and powerful, high school drop out Jeffrey Epstein.
analognoise · 1h ago
Obviously we trusted the economic prowess of the author of “The Art of the Deal”, the convicted felon who bankrupted a casino and should have been barred from running for his actions on J6.
I’m glad we’re all in such tiny, bruised, felonious hands.
platevoltage · 3h ago
You don't trust that smile?
pandemic_region · 4h ago
That was Fake News I'm afraid.
Incipient · 3h ago
If you have two competing providers, technically one could reduce margins to wear some of the tariff to out compete their competitor. Even if that DID happen, chances are wallmart etc would STILL put up prices, blame the tariffs, and just enjoy a higher profit margin.
Essentially even in an unrealistically optimistic position, the consumer will STILL get stuck with higher prices.
thelastgallon · 3h ago
Retailers can add mandatory tips!
bix6 · 5h ago
Are we stagflating yet?
thisisit · 3h ago
Next step, Feds need to lower the interest rates.
thisisit · 2h ago
I always surprised that people defending these tariffs don't see the conflicting defenses.
The default defense comes from Trump who has - since 1980s has pushed for tariffing other countries to raise government revenue. The idea being - America drives lot of market demand. This seems to ignore basic economic facts. Importers pay tariffs and also that corporates are all about profit maximization.
Companies might eat some of the tariffs in short term but they will always reduce costs in long term. That means jacking up prices slowly, finding ways to circumvent tariffs, using low cost - maybe even harmful but unbanned substitutes in products to name a few. Even the domestic company has a reason to hike up prices just below the price of imported goods. And also, because there is less competition domestic company might even reduce R&D because they can continue to rake in profits from local markets.
The second defense is around domestic companies. I don't think anyone will disagree that each country needs to protect its most crucial domestic industries. But in those cases tariffs ae a precision tool, not a hammer. Tariffing everything doesn't make sense except it goes back to original defense - the point is to raise revenue.
shmerl · 4h ago
Tariffs are essentially just a sneaky way to tax the consumer who ends up paying for this.
randunel · 4h ago
Sony actually made Europeans and Australians pay for US consumers' tariffs. They raised prices everywhere else to keep US prices unchanged.
That's cute, so are they eating the tariff costs yet?
shmerl · 4h ago
It ends up working like the sales tax. Officially it's the seller who is obligated to pay it, but it's the buyer who ends up paying it anyway.
kjkjadksj · 4h ago
They were very recently announced to go up for the US PS5 as well.
esalman · 3h ago
Yes, as soon as the inventory runs out.
senectus1 · 4h ago
lol.. hampering the sales globally so that you can look good to the man-child emperor.
Remember future contenders... bribery is legal now.
Guthur · 3h ago
It has been legal for quite some time, why do you think companies and high worth individuals provide so much money to the political elites, and quite often to both sides. It's just that Trump is quite vulgar and has thrown out any pretense, but they were all quite guilty.
hn_throwaway_99 · 4h ago
Are they really that sneaky? Literally every economist who's not trying to give Trump a handy says this is the obvious outcome of tariffs (heck, the entire way that tariffs protect native jobs is by making foreign goods more expensive so native goods, which are more expensive to produce due to higher labor costs/lower productivity, are competitive).
Saying stuff like "China will pay the tariffs" was always bloviating fantasy to anyone who can stitch 2 brain cells together to make a coherent thought.
shmerl · 4h ago
Sneaky in the sense that it was sold to the masses as not being being a tax on them, while it very practically is.
You'd think this is obvious, but you'd think people wouldn't vote for such ones either in the first place.
rayiner · 3h ago
The Obama folks were correct about demographics being destiny: https://www.politico.com/blogs/politico44/2012/07/demographi.... Mass immigration killed the Mccain/Romney GOP. What they overlooked is that, the vacuum would be filled by a right wing party that looks more like the right wing parties you see in the rest of the world.
Trump, with his lying and outright vote buying (No Taxes on Tips) is the kind of right wing candidate that can win enough immigrants to be nationally viable. Blue Rose research estimates Trump tied with naturalized citizens. Little Bangladesh in Queens swung 50 points to the right from 2020. Populist rhetoric unrooted in facts is really popular among third world voters.
seanmcdirmid · 3h ago
A lot of Muslims voted for Trump as a protest against Biden’s support for Israel. They just didn’t realize that Trump’s solution to the Gaza conflict would be to turn Gaza into a resort without Gazans.
docdeek · 3h ago
>> Trump, with his lying and outright vote buying (No Taxes on Tips) is the kind of right wing candidate that can win enough immigrants to be nationally viable.
The economic incidence of tariffs (like any tax) depends on elasticity. But yes, in general, some portion of the tax will be passed onto consumers. So what? Economists agree that taxing consumption is better than taxing income or capital gains: https://www.npr.org/sections/money/2012/07/19/157047211/six-... (points 3 and 4).
A tariff is a consumption tax that’s less than 100% passed onto consumers, which has the effect of discouraging imports. All good things.
hn_throwaway_99 · 3h ago
It's a giant pet peeve of mine when people post a link that very superficially backs their argument, but then when you go and read it, it directly contradicts their point. Critical sentence from point 4: "Instead, impose a consumption tax, designed to be progressive to protect lower-income households."
Tariffs are the exact opposite of that, they're highly regressive.
JKCalhoun · 3h ago
How do you design a progressive consumption tax? Tax only private jets and yachts?
Wondering why raising higher-bracket income tax is such a problem.
hn_throwaway_99 · 3h ago
> How do you design a progressive consumption tax? Tax only private jets and yachts?
There are lots of ways to design a progressive consumption tax, but yes, one way is to tax luxury goods at a higher rate than essentials. This is already done in many states, for example, where groceries (or at least "basic" groceries like bread, milk and produce but not prepared foods) are exempt from sales tax.
Another way is a sales tax rebate, e.g. where everyone can file for a rebate of sales tax of, say, the first $10000 of goods in a year. So poorer people with lower expenditures end up having a much lower effective tax rate.
mitthrowaway2 · 3h ago
Another way is to put some sales tax revenue towards funding UBI. This is progressive because people who consume more than average will pay more into it, and people who consume less than average will get more out of it, and busy people don't have to spend their time organizing receipts to claim their sales tax rebate.
Teever · 3h ago
Canada has a national 5% Goods and Services Tax (GST) that is offset by an income-tested GST credit that is paid out quarterly.
Additionally there are a lot of goods that are GST exempt.
Things like basic groceries, prescription drugs, feminine hygiene products, hearing aids etc...
shmerl · 3h ago
Exactly. Unlike income tax, tariffs don't depend on income.
shmerl · 4h ago
It's not about so what, it's about how many are brainwashed not to understand the obvious thinking they'll get tax reductions, while they are getting tax increases in practice. Same ones elected these people in the first place.
platevoltage · 3h ago
better for whom exactly?
mindslight · 2h ago
ah yes, raising taxes is great when Dear Leader does it. You do realize you've got about three years until you're waxing eloquently about the virtues of eating the bugs, right?
King-Aaron · 3h ago
I'm frankly stunned that there is an argument in the US about "who pays for tariffs". It's like dictionaries don't exist or something. The literal definition of the word reveals who the tax is effectively applied to.
jader201 · 3h ago
You’re applying a literal definition, but in practice, it can be different.
For (a simplified) example, if there’s a 30% tariff on a $100 item, all else equal, the price is now $130, and the customer that originally would have paid $100 is now paying $130.
But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
Also, the foreign supplier can do the same thing. Rather than lose the business of the US retailer, they may, in turn, eat some/all of the tariff.
I’ve seen both of these happen with products I’ve purchased over the past few months.
I’m not saying this happens a lot, but I don’t know that it doesn’t, either.
I’m just saying that it’s not as clear cut as the definition.
dvh · 6m ago
Why are people who defended tariffs always use em dashes?
King-Aaron · 3h ago
The supplier absorbing the tariff isn't sustainable, they will always ultimately pass the cost on to the consumer one way or another. And your $130 example still demonstrates that the consumer just ends up paying more.
The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead. But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
Anyway I just think everyone in the US are very silly for allowing this to happen. Very silly indeed.
You see, tariffs are a tool. They’re protectionist. And when other countries distort markets, importers often respond this way.
kergonath · 2h ago
If you pay attention you’ll see a couple of differences between what the EU does and what the US does. Your example is of a targeted tariff, directed at a specific industry, which is already present in the EU and that was deemed strategic. What it is not is indiscriminate, affecting all countries in the world and all industries with arbitrary rates that change every week.
Targeted tariffs have always existed, and the US and the EEC and then the EU were involved in a lot of trade skirmishes that did result in some barrier being put in place. This is not the same.
King-Aaron · 3h ago
I'm not, no.
jader201 · 3h ago
> The supplier absorbing the tariff isn't sustainable, they will always ultimately pass the cost on to the consumer one way or another.
I’m not arguing that it is. But passing the price on to the customer isn’t necessarily sustainable either.
And to be clear, I’m not arguing in favor of tariffs. Just saying that, in practice, it’s not always “suppliers and retailers still get their money, and the customer pays 100% of the tariff”.
> And your $130 example still demonstrates that the consumer just ends up paying more.
That example was the case when it does follow the definition. The exceptions that followed that were when it may not.
> The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead.
Not just the customer, but the retailer or manufacturer getting goods/parts from foreign suppliers.
> But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
No argument, there. I’ve already seen some small businesses make the tough choice to close their doors because of tariffs.
troupo · 3h ago
> But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
Please show me retailers that have 30%+ margins that let them happily absorb all of the tariff. Walmart's margin is 3-4%.
Even if they absorb just some of the tariff, it means the customer still ends up paying more.
spankibalt · 3h ago
You obviously didn't get the memo: Dictionaries are woke.
King-Aaron · 3h ago
With the way old Donald wants to rewrite history in the museums, it wouldn't surprise me if dictionaries were next.
spankibalt · 3h ago
My comment was about the intellectual aptitude of Trump's most vocal fans... and therefore easiest marks.
bananapub · 2h ago
it really is striking how pathetic almost all elites in the US have turned out to be, and in particular, almost all business leaders.
why is there ~zero prominent CEOs/managers on tv explaining how turning US trade policy in to a personalised autocracy of one senile old man is Bad, Actually?
ZeroGravitas · 1h ago
Because he'd destroy them one by one.
They'd need to collectively form some kind of union to fight that power imbalance.
Which they know from being on the other side of that dynamic.
JumpCrisscross · 5h ago
Do we have a better source?
El País’ “ideology has been defined by a leaning towards Europeanism, progressivism, and social liberalism.
…
In the late 1970s and 1980s, El País had close connections with the Spanish Socialist Workers' Party (PSOE)” [1].
> On Thursday, Walmart CEO Doug McMillon said his company's costs keep climbing: "We've continued to see our costs increase each week, which we expect will continue into the third and fourth quarters," he said on an earnings call.
JumpCrisscross · 4h ago
This is a better source—it’s clear about where the figures come from and the degree to which we know who is raising prices versus who has yet to report. (So is the CNBC article.)
I did a Google search for “retailers raising prices because of tariffs” and the link below was the first result. Seriously, do you really think that retailers are just going to eat the cost of tariffs for the next three years?
Retailer's prices are not set to be "fair", they're set to maximize their return on the supply vs demand curve. In other words, increasing prices will generally cost them money, rather than make them money. In other other words, they expect that if they charge 5% more, they will trend towards selling 6% less.
So in general they end up stuck between a rock and a hard place in a situation like this. The most logical path forward would be to work on supporting domestic supply chains, not subject to tariffs, and helping them to gradually reduce prices through increasing both volume and efficiency.
But the problem that concept runs into is that there's about a coin's flip chance that in 3 years these tariffs will simply be reversed. And any domestic suppliers that were relying on them for a competitive edge will simply be left buried. It thus discourages any sort of meaningful investment in these domestic providers.
_carbyau_ · 1h ago
> Retailer's prices are not set to be "fair", they're set to maximize their return on the supply vs demand curve.
I would add to that statement the context of the market and competitors. Even if retailers east some % of cost increase, this is still a pretty large price increase pressure.
Fair point regarding possible tariff reversal effect on industry investment!
Rock <-USA-> Hard place. At least deflation is not going to be an issue...
AnthonyMouse · 4h ago
Retailers typically have thin margins, e.g. 2%. They're paying $0.98 to sell something for $1 so they can keep $0.02. Not all of the $0.98 is imported products (a lot of it is salaries and rent etc.), so a 10% tariff might only raise their costs by 5%. But then they're paying $1.03 to sell something for $1. Do they care more about maintaining their volume at that point? Of course not, they're going to raise price instead of making a loss. But so are their competitors, because their costs went up too, which prevents them from losing sales to the competition anyway. Then they only lose sales to customers being unable to afford it, e.g. because they have to spend more on food and then have less to spend on new cars.
This is true of most taxes in a competitive market. Competition was keeping margins low so the money has to come from higher prices or lower salaries, and salaries are sticky so it's usually higher prices. So if the tariffs are instead of some other taxes, it's just a revenue-neutral tax change, not inherently raising prices. But if the tariffs are on top of other taxes then it's a tax increase which gets passed on as higher prices.
somenameforme · 3h ago
Food is about 90% domestically produced [1], so tariffs are inconsequential there. The things that are going to be largely affected by tariffs are things like imported electronics, furniture, and so on.
The tariffs are primarily hitting the discretionary sector of products, which means people can simply stop buying them. There's also product replacement as an option. For instance the next time somebody's coffee maker breaks they end up buying a French press only to discover that not only is it way cheaper (no filters!), but it never breaks and makes way better coffee anyhow! (Pro Tip: don't use boiling water)
Coffee and chocolate are not domestically produced, nor are bananas which are like the potatoes of the fruit world in terms of how productive they are.
There are lots of nondiscretionary products that take a while to flow through to the point you notice them. The parts to repair the machines that make things for example. Or at a low level, the inserts used in mills to make things out of metal. There are other inserts available, but they aren't as good so they need replacement more often.
somenameforme · 3h ago
There actually are already domestically produced coffees in America! And if other coffees end up forced to significantly raise costs, that would increase the market share and production of these coffees. It could end up being a major economic boon to places like Puerto Rico. The link I mentioned also covered non-domestic inputs, and not just final products. It's about 4.7%.
The lion's share of imports are going to be alcohol and purchasing produce outside of season.
dendrite9 · 3h ago
It seems unlikely that we can grow enough coffee in Puerto Rico and Hawaii to make up for the difference. It might be good for those producers though.
Do you mean the lion's share of food imports or imports in general? Lots of seafood is processed elsewhere and imported the US. Strangely it appears ground beef is imported to the US even though we are a net exporter of beef.
troupo · 3h ago
> There actually are already domestically produced coffees in America
From American coffee beans? At enough quantity to cover the US market?
JumpCrisscross · 3h ago
> Food is about 90% domestically produced [1], so tariffs are inconsequential there
Prices are determined at the margin. Domestic producers suddenly have less foreign competition. That lets them raise prices. (Which is what we’re seeing, though not at an accelerated rate to what food prices were doing in ‘24 [1].)
food is largely domestically produced by foreign workers who are being deported.
JumpCrisscross · 4h ago
I don’t doubt the message. I was just surprised at the lack of citations in the article. Then I learned about the source’s bias.
biophysboy · 4h ago
It’s just a summary of the recent Q2 earnings presentations from the big retailers (the writer cites this 1st sentence). Look at those reports if you want primary sources
dqv · 4h ago
What do you mean by lack of citations? You mean self-linking to their own content? All the other alternatives, including the one you said "is a better source", do the exact same thing. I am having a hard time finding the ideological bias you're talking about in the El País article.
JumpCrisscross · 4h ago
The CNBC article is actually the best, since it corroborates its numbers with their own price research.
Perhaps this is just coming from a finance background. But I’m not a fan of folks quoting numbers from “financial reports” without saying what report they’re citing.
> having a hard time finding the ideological bias you're talking about in the El País article
To be clear, I don’t allege this article has a bias. Just that I’m going to be sceptical of a paper calling something out that aligns with their priors.
dqv · 4h ago
I see what you mean now. The CNBC article does a better job at discussing the technical impacts, while both the NPR and El País are more oriented toward social impacts.
What is most surprising to me is the price increase for dairy products. I wonder how much of that increase, if any, is caused by tariffs vs other factors.
Instead, we blew up the deficit and lowered taxes (but only for the really rich).
So many problems and social angst is downstream of expensive housing. Higher interest rates, fewer laborers, and more expensive building supplies (due to tariffs) is just making the housing crisis worse.
Oh and just wait until the Fed’s independence is completely gone. Our economy is galloping towards Peronism. Favored groups get economic benefits. Inflation is out of control. Competitiveness is gone. Capital flight. Rapid erosion of quality of life. It won’t be fun.
Everything has trade offs. Diluting the dollar increases prices for nothing in return. Pretty much all downside for everybody but the top. Tariffs increase prices to the benefit of domestic producers and benefits everybody.
What we will see is if prices are more important than building skills and wealth of our fellow citizens.
This is not a definition I have seen used by academic or working economists. If the purchasing power of $1 decreases, we can say there has been inflation. Even if the money supply is constant, if shirts used to cost $10 but now cost they cost $100 due to increased demand, a supply shock, a union strike, a tax, or a speculative shirt buying bubble, it would be considered inflation in all of those cases, regardless of the cause.
It sounds like you mean monetary inflation, but the fed’s mandate is not to control monetary inflation (which would be a lot simpler) but to ensure stable prices. The mandate has no exception for non-monetary causes of price instability.
Of course measuring how much a dollar can purchases is an enormously complex and subtle task that can be approached in many different ways. But the whole argument for tariffs is that foreign producers of goods are selling them so cheaply that American producers cannot compete. So if we increase the price of those foreign goods by adding a tax on it and shift some good consumption to more expensive American producers, that’s obviously going to reduce what a dollar can purchase.
Not necessarily, and there are plenty of examples around the world of tariffs that do not do that, but instead cripple the economy. Tariffs are just one aspect. If the domestic supply is not there for one reason or another, you have the worst of both worlds, with high prices and still no re-industrialisation.
You need companies to be reasonable confident that they’ll be making money next year, and you need the situation to be stable enough to let people invest to make it happen. You need those people to be confident enough that they won’t just be crushed by a president’s friend who has more access to power than they have. You need rule of law and due process. Not a kleptocratic oligarchy.
Otherwise you’re just sawing off your leg to repair a broken ankle.
I think tariffs are a regressive tax brought on by the most economically illiterate administration in living memory.
> What we will see is if prices are more important than building skills and wealth of our fellow citizens.
So instead of it being on the shoulders of the “wealthy job creators” who definitely earned it all fair and square and should keep every penny, it’s now on the poor and the average citizen?
These are just regressive policies that lead to outright social unrest , and a horrific distribution of wealth.
I’m glad we’re all in such tiny, bruised, felonious hands.
Essentially even in an unrealistically optimistic position, the consumer will STILL get stuck with higher prices.
The default defense comes from Trump who has - since 1980s has pushed for tariffing other countries to raise government revenue. The idea being - America drives lot of market demand. This seems to ignore basic economic facts. Importers pay tariffs and also that corporates are all about profit maximization.
Companies might eat some of the tariffs in short term but they will always reduce costs in long term. That means jacking up prices slowly, finding ways to circumvent tariffs, using low cost - maybe even harmful but unbanned substitutes in products to name a few. Even the domestic company has a reason to hike up prices just below the price of imported goods. And also, because there is less competition domestic company might even reduce R&D because they can continue to rake in profits from local markets.
The second defense is around domestic companies. I don't think anyone will disagree that each country needs to protect its most crucial domestic industries. But in those cases tariffs ae a precision tool, not a hammer. Tariffing everything doesn't make sense except it goes back to original defense - the point is to raise revenue.
Also, lo, PS5 https://www.reddit.com/r/PS5/comments/1my6t3o/sony_discounts...
Remember future contenders... bribery is legal now.
Saying stuff like "China will pay the tariffs" was always bloviating fantasy to anyone who can stitch 2 brain cells together to make a coherent thought.
You'd think this is obvious, but you'd think people wouldn't vote for such ones either in the first place.
Trump, with his lying and outright vote buying (No Taxes on Tips) is the kind of right wing candidate that can win enough immigrants to be nationally viable. Blue Rose research estimates Trump tied with naturalized citizens. Little Bangladesh in Queens swung 50 points to the right from 2020. Populist rhetoric unrooted in facts is really popular among third world voters.
Harris took the same position on 'no taxes on tips'. https://www.bbc.com/news/articles/clyn511dgnjo.amp
A tariff is a consumption tax that’s less than 100% passed onto consumers, which has the effect of discouraging imports. All good things.
Tariffs are the exact opposite of that, they're highly regressive.
Wondering why raising higher-bracket income tax is such a problem.
There are lots of ways to design a progressive consumption tax, but yes, one way is to tax luxury goods at a higher rate than essentials. This is already done in many states, for example, where groceries (or at least "basic" groceries like bread, milk and produce but not prepared foods) are exempt from sales tax.
Another way is a sales tax rebate, e.g. where everyone can file for a rebate of sales tax of, say, the first $10000 of goods in a year. So poorer people with lower expenditures end up having a much lower effective tax rate.
Additionally there are a lot of goods that are GST exempt.
Things like basic groceries, prescription drugs, feminine hygiene products, hearing aids etc...
For (a simplified) example, if there’s a 30% tariff on a $100 item, all else equal, the price is now $130, and the customer that originally would have paid $100 is now paying $130.
But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
Also, the foreign supplier can do the same thing. Rather than lose the business of the US retailer, they may, in turn, eat some/all of the tariff.
I’ve seen both of these happen with products I’ve purchased over the past few months.
I’m not saying this happens a lot, but I don’t know that it doesn’t, either.
I’m just saying that it’s not as clear cut as the definition.
The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead. But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
Anyway I just think everyone in the US are very silly for allowing this to happen. Very silly indeed.
You see, tariffs are a tool. They’re protectionist. And when other countries distort markets, importers often respond this way.
Targeted tariffs have always existed, and the US and the EEC and then the EU were involved in a lot of trade skirmishes that did result in some barrier being put in place. This is not the same.
I’m not arguing that it is. But passing the price on to the customer isn’t necessarily sustainable either.
And to be clear, I’m not arguing in favor of tariffs. Just saying that, in practice, it’s not always “suppliers and retailers still get their money, and the customer pays 100% of the tariff”.
> And your $130 example still demonstrates that the consumer just ends up paying more.
That example was the case when it does follow the definition. The exceptions that followed that were when it may not.
> The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead.
Not just the customer, but the retailer or manufacturer getting goods/parts from foreign suppliers.
> But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
No argument, there. I’ve already seen some small businesses make the tough choice to close their doors because of tariffs.
Please show me retailers that have 30%+ margins that let them happily absorb all of the tariff. Walmart's margin is 3-4%.
Even if they absorb just some of the tariff, it means the customer still ends up paying more.
why is there ~zero prominent CEOs/managers on tv explaining how turning US trade policy in to a personalised autocracy of one senile old man is Bad, Actually?
They'd need to collectively form some kind of union to fight that power imbalance.
Which they know from being on the other side of that dynamic.
El País’ “ideology has been defined by a leaning towards Europeanism, progressivism, and social liberalism.
…
In the late 1970s and 1980s, El País had close connections with the Spanish Socialist Workers' Party (PSOE)” [1].
[1] https://en.m.wikipedia.org/wiki/El_Pa%C3%ADs
> On Thursday, Walmart CEO Doug McMillon said his company's costs keep climbing: "We've continued to see our costs increase each week, which we expect will continue into the third and fourth quarters," he said on an earnings call.
https://www.businessinsider.com/companies-raising-prices-inc...
So in general they end up stuck between a rock and a hard place in a situation like this. The most logical path forward would be to work on supporting domestic supply chains, not subject to tariffs, and helping them to gradually reduce prices through increasing both volume and efficiency.
But the problem that concept runs into is that there's about a coin's flip chance that in 3 years these tariffs will simply be reversed. And any domestic suppliers that were relying on them for a competitive edge will simply be left buried. It thus discourages any sort of meaningful investment in these domestic providers.
I would add to that statement the context of the market and competitors. Even if retailers east some % of cost increase, this is still a pretty large price increase pressure.
Fair point regarding possible tariff reversal effect on industry investment!
Rock <-USA-> Hard place. At least deflation is not going to be an issue...
This is true of most taxes in a competitive market. Competition was keeping margins low so the money has to come from higher prices or lower salaries, and salaries are sticky so it's usually higher prices. So if the tariffs are instead of some other taxes, it's just a revenue-neutral tax change, not inherently raising prices. But if the tariffs are on top of other taxes then it's a tax increase which gets passed on as higher prices.
The tariffs are primarily hitting the discretionary sector of products, which means people can simply stop buying them. There's also product replacement as an option. For instance the next time somebody's coffee maker breaks they end up buying a French press only to discover that not only is it way cheaper (no filters!), but it never breaks and makes way better coffee anyhow! (Pro Tip: don't use boiling water)
[1] - https://www.ers.usda.gov/data-products/charts-of-note/chart-...
There are lots of nondiscretionary products that take a while to flow through to the point you notice them. The parts to repair the machines that make things for example. Or at a low level, the inserts used in mills to make things out of metal. There are other inserts available, but they aren't as good so they need replacement more often.
The lion's share of imports are going to be alcohol and purchasing produce outside of season.
Do you mean the lion's share of food imports or imports in general? Lots of seafood is processed elsewhere and imported the US. Strangely it appears ground beef is imported to the US even though we are a net exporter of beef.
From American coffee beans? At enough quantity to cover the US market?
Prices are determined at the margin. Domestic producers suddenly have less foreign competition. That lets them raise prices. (Which is what we’re seeing, though not at an accelerated rate to what food prices were doing in ‘24 [1].)
[1] https://fred.stlouisfed.org/series/CPIUFDNS
Perhaps this is just coming from a finance background. But I’m not a fan of folks quoting numbers from “financial reports” without saying what report they’re citing.
> having a hard time finding the ideological bias you're talking about in the El País article
To be clear, I don’t allege this article has a bias. Just that I’m going to be sceptical of a paper calling something out that aligns with their priors.
What is most surprising to me is the price increase for dairy products. I wonder how much of that increase, if any, is caused by tariffs vs other factors.