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While this is technically true, I think that it is directionally false. Some products are very cheap to produce and have a high profit margin. If Trump is adding tariffs to ransomware payments, then I would expect competent ransomware gangs to keep the price after tariffs the same, because that is based on what their victims are estimated to be willing to pay, not what what it costs to infect their system. (It you tax it at 10000%, it might no longer be profitable, though.)
But most products do not have a very high profit margin. Take non-brand electronics, such as a digital thermometer. The manufacturer of the cheapest acceptable thermometers typically has the ability to scale their production up, so through competition, the market drives the profit margin down. To absorb a 100% tariff, a manufacturer would have to cut their profit margin from 50% to zero. But if they had such a high profit margin, they would probably have long been out-competed.
Now, most non-brand digital electronic toys have a high elasticity of demand, customers might buy all sorts of things just in case because they are cheap, and would be much more reluctant to buy them at 10x the price. So in many cases, what the tariffs would do is simply to prevent a sale.
Trump's world model seems to be that sellers are generally ripping buyers off by taking dollars for what costs pennies to produce, and if he forces them to hand half of their profits to the US government, they will gladly do so because ripping of Americans will still be insanely profitable. I just don't think that he is right.
Broadly agreed. I suspect many products are no longer profitable to sell in America at all and many others have a vastly reduced customer base. And, like I said, that's the actual deadweight loss here: preventing transactions that would otherwise have happened. When the tariff is paid there's no actual loss, the government just takes some of the value for itself. But a prevented transaction doesn't merely extract value, it destroys it.
My point was just the technical truth. Pedantic, maybe, but this isn't the sort of information environment where you can't afford nuance and must prioritize being merely directionally correct. I'm certainly not claiming cheap consumer imports secretly have enormous margins -- I don't know if Trump really believes that, but I don't.
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