"Still, this move is a big deal, much bigger than in 2018. In his first term, Trump put some strategic tariffs on China, charging roughly 20-30% tariffs across a host of goods, but with a bunch of exemptions. Apple’s iPhone never got tariffed, for instance, and a lot of medical supplies went untouched. There’s a lot of hot air about tariffs increase consumer prices, but that’s not always true. The first round of Trump tariffs mostly didn’t increase consumer prices, but came out of corporate profits, so they didn’t generate inflation.
Why is that? Well it’s important to recognize that tariffs don’t apply to the retail price of a good, but to its wholesale price when imported. So a Nike shoe might cost $150 retail to an end consumer at a store but that’s before markup; Nike is paying $20 for it from a Chinese supplier. The $130 difference between what the Chinese supplier charges and the end American consumer pays is a mark-up, and it goes to Nike for branding, distribution, profit, etc. The tariff is charged on the $20. So even a very large 50% tariff will be just $10, which means Nike will still have a giant cushion, and can choose whether to pass the tariff along or reduce its profit, or both. Or it can negotiate some of the cost with its Chinese supplier.
This time, because the tariffs are hitting every sector, consumer prices are likely to change, though it will differ industry-by-industry. There are plenty of companies who have to raise prices to cover costs. But another reason for price hikes could be “seller’s inflation,” aka there’s market power throughout the economy, and corporations with such power have an excuse to charge higher prices, as they did during Covid. They can just blame Trump, and collect more profit. On the other hand, companies are scared of the new administration."
https://www.thebignewsletter.com/p/monopoly-round-up-what-did-trump
#USA #Trump #TradeWar #China #Tariffs #Protectionism
Why is that? Well it’s important to recognize that tariffs don’t apply to the retail price of a good, but to its wholesale price when imported. So a Nike shoe might cost $150 retail to an end consumer at a store but that’s before markup; Nike is paying $20 for it from a Chinese supplier. The $130 difference between what the Chinese supplier charges and the end American consumer pays is a mark-up, and it goes to Nike for branding, distribution, profit, etc. The tariff is charged on the $20. So even a very large 50% tariff will be just $10, which means Nike will still have a giant cushion, and can choose whether to pass the tariff along or reduce its profit, or both. Or it can negotiate some of the cost with its Chinese supplier.
This time, because the tariffs are hitting every sector, consumer prices are likely to change, though it will differ industry-by-industry. There are plenty of companies who have to raise prices to cover costs. But another reason for price hikes could be “seller’s inflation,” aka there’s market power throughout the economy, and corporations with such power have an excuse to charge higher prices, as they did during Covid. They can just blame Trump, and collect more profit. On the other hand, companies are scared of the new administration."
https://www.thebignewsletter.com/p/monopoly-round-up-what-did-trump
#USA #Trump #TradeWar #China #Tariffs #Protectionism
