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Notes -
Tariffs aren't as cooked as they seem
I saw this video on YT about the tariffs from the perspective of a dropshipper, and they are actually less than they might seem. In his example, on an item that retails for $600, 50% tariffs apply to the wholesale price of the item of $200, and the overall tariff tax burden is $100, or 17% of the retail price of the item.
This might seem bad, but to put it in perspective, countries in Europe have a VAT tax (similar to sales tax) of 20-30% on the retail price, and that's on top of any customs import duties/tariffs. Even though the calculation is different than sales tax, my understanding is that the total tax burden is always equal to the percentage of the final sale price of the item. And nobody is complaining that the sky is falling in Europe or that retail prices are crazy over there.
Even more so for cheap crap, the tariff burden is even less important. For <$20 crap sold on Scamazon, the wholesale price may be only $1-3, which is possibly less than the cost of the sea freight to ship it to the Scamazon FC. Then Scamazon will take $5-10 on FBA fees. So in the end even a 50 or 100% tariff may only account for $1-2 out of a $20 item.
It remains to be seen if US manufacturers can actually pick up any of the slack after the tariffs. A huge amount of manufacturing heavily automated and done in china due to the preexisting large manufacturing base as well as the lack of any good reason not to do it there. I saw this tweet about gpus, where semiconductors are tariff-exempt, but finished gpus are not.
A top of the line AI gpu is simply a relatively small circuit board, with a huge chip on it and a handful of supporting components. There isn't even a cooler or bracket to worry about. You could order all of the components from china (negligible bom and tariff besides the chip itself) and set up a factory with just a pick & place machine and reflow oven, and pump out 100 $30,000 gpus per hour. There's no reason we can't do this, we just don't do it because we never had a reason to.
Well that kinda sucks. Whatever you think about tariffs I tend to dislike the cheap-Chinese-goods-Amazon-industrial complex.
The plus side of this is that the tax incidence will be borne almost entirely by the manufacturer rather than the consumer.
In that sense tariffs are basically free money for the US gov, paid for by the people currently getting rich off import wholesaling.
You can't tax one side of a transaction. If the US government taxes imported widgets by 20%, then the price for the consumer to buy those imported widgets will go up by 20% across the board, because all widget importers have had this cost added and the competitive pressures keeping prices down haven't changed.
Who pays the tax is determined by elasticity of supply and demand. If supply is inelastic as in this case, the producer ends up bearing most of the tax. The demand for overpriced Amazon tut is also quite elastic since people are very sensitive to small changes in price.
Compare cigarettes that are basically the opposite situation (classic textbook example). Demand is inelastic in the short run due to addiction, so consumers pay virtually all the tax.
And the more inelastic either demand or supply are, the less dead weight loss there is to the tax, because quantity sold drops less and more producer/consumer surplus is harvested by the tax rather than lost through unmet demand.
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