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Assuming for a moment that the purpose of tariffs is to shift consumer spending away from foreign imports and towards domesticly manufactured products,
Shouldn't you want retailers to break-out the tariff cost into a seperate legible line item?
A story broke this morning that Amazon was going to start labeling products with the tariff charged on each item to make the price changes legible to the consumer. From the perspective of a protectionist economic policy, this is a good thing. It makes it unignorably clear which items are made in China and which items are made in America. It also shows the direct monetary incentive for you the consumer to but the Made in America item over the Made in China item.
From the perspective of whatever the hell the Trump administration is trying to do, this is a disaster. I understand that governments would prefer the populace not be particularly mindful of how much money they pay in taxes, but it is another thing alltogether to hear this articulated by the press secretary as something that they think makes the administration look good to the public. The official line from the MAGA infuencer types on Twitter is that retailers are doing this as a distraction from the fact that they sell cheap slop from Asian sweatshops, but this is actually highlighting the fact that they sell cheap slop from Asian sweatshops.
Of all sad words of tongue or pen, the saddest are these,Hanania was right again.
I mean, it's a lie. Highly misleading, at least. It's clearly intended to communicate to the consumer that they're assuming the whole burden of the tax. This simply isn't how taxes work. The burden is split between buyers and sellers according to the relative elasticity of supply and demand. This is hard to measure in practice but you should never expect to see it go 100% one way or the other. They can list the tax as a line item if they like, it doesn't change the reality of the situation for them: if they want to maximize their profits, they'll have to reduce their margins. Of course, the maximum possible profit may in fact be negative now...
As @anti_dan says, so far as the consumer is concerned, it's no different from any other government-imposed cost, including both non-tax impositions like costly regulatory requirements and each direct and indirect tax on a business's operations: sales tax, which is often reported, but also corporate income tax, capital gains paid on their stock (which reduces share price, which reduces the amount of liquidity they can raise through sales, which can be compared to the cost of loaning that capital to get an equivalent rate), their employees' income tax (of which, again, they bear some of the incidence). Sellers love to complain about their costs, but at the end of the day all that matters to the consumer is the product they offer and the cost they offer it at.
(Though, as others have intimated, perhaps the real goal is to propagandize against the tax in the hopes they will later be able to offer the same product at a lower price. That does raise the question why they weren't already doing this for all those other taxes, however.)
For that matter, where do all these people who think taxes being paid is a bad thing go when the discussion turns to income tax, or payroll tax, or social security? I'm not convinced the marginal government dollar isn't net-negative, but Democrats don't generally hold that position. The money actually paid into the tariffs is no better or worse than any other source of tax dollars: the downside is all the transactions that don't occur because of the tariffs. I suppose that's harder to communicate, though.
Tariffs are generally bad. They can play a part in a net-positive strategy, but these obviously don't: the tariffs are the whole strategy. Are they bad enough to justify lying to make them look worse than they are, or bad in different ways? I'm not sure.
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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