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Tariff Isn't Tax on Other Countries?🤪
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this post was submitted on 17 Mar 2025
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The difference is that this way it's much easier to calculate prices.
If the tax were 20%, the exporter would have to do the inverse calculation. That is, "which price will result in me gaining $1000?" Which is not 1200, since 20% of 1200 is 240. x = 0.8y -> y = (1/0.8)*x -> y = 1.25x. so the exporter would have to price it at 1.25x the price, $1250. 20% of 1250 is 250.
So it's unintuitive that a 20% tax would result in a 25% price increase. That's my guess why tariffs are applied to the importer instead of exporter.