ELI5 How does tariffs not hurt the country imposing them on it people? (lemmy.world)

submitted 4 months ago by Patnou@lemmy.world to c/explainlikeimfive@lemmy.world

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[-] compostgoblin@lemmy.blahaj.zone 5 points 4 months ago

A tariff is effectively just an import tax. When an importer brings the goods into the country, they have to pay the tariff to the government. But they still need to make a profit, so they raise their price to the distributor they sell to. And the distributor has to cover the increased cost, so they charge the stores more. And then the stores charge higher prices to the end consumers.

In some cases, tariffs might be used to target a specific sector or industry to protect domestic manufacturing in that area. The idea is that by raising the price of imports, you make domestic goods relatively cheaper, so consumers will prefer the domestic. But if tariffs are applied broadly, and the country doesn’t have enough domestic manufacturing to meet demand, and its economy relies heavily on imports, then tariffs just raise costs to consumers for no reason.

[-] reddig33@lemmy.world 4 points 4 months ago

Tariffs work when you have multiple suppliers and only impose them on one. As long as there is someone else to buy from at a cheaper/normal price, it works.

They don’t work when when you tariff everything coming into the country (like Trump is doing). That’s just a tax on the consumer.

[-] squaresinger@lemmy.world 2 points 4 months ago

They kinda work if you have a solid local production that is not dependant on imports. The US doesn't have that.

[-] Stowaway@midwest.social 2 points 4 months ago

Even then localy produced products may go up in price to just under the imported price to maximize profits even though there is no additional overhead.

[-] PlantJam@lemmy.world 2 points 4 months ago

They do.

[-] Nighed@feddit.uk 1 points 4 months ago* (last edited 4 months ago)

The idea is that while it punishes the citizens of the country doing the tariffs, it makes their local industry more competitive in the country. This can be used fairly or unfairly.

Take steel for example. Most countries consider it a strategic resource, the want/need to be producing it to guarantee a supply in case of war, supply issues etc. Another country might be able to sell it cheaper, but you want to ensure your country still produces it; put a tariff on it, so foreign steel costs as much as the local stuff, keeping them in business.

Europe put a tariff on Chinese cars, because China was subsidising their companies so they could flood Europe with unfairly cheap cars. (Although local companies dropped the ball too)

Trumps tariffs won't work as no one trusts that they will remain - he changes them on a whim, so no one can build out manufacturing to take advantage of them.

[-] iii@mander.xyz 0 points 4 months ago

Can you rephrase that question? I can't quite understand it

[-] Patnou@lemmy.world 0 points 4 months ago

Ok for example Trump started a trade war with countries we buy from. So the tariffs will cause them to raise their prices on imports into the US but passing on the cost to the US consumer. I mean these countries are going to charge us more to make up for it right? So whose smart idea was it to think tariffs would not hurt the american people. I just really don't get it because don't we do good for ourselves and not hurt ourselves?

[-] ikidd@lemmy.world 4 points 4 months ago* (last edited 4 months ago)

The exporting country doesn't charge more, the increase comes from the duty charged as it lands in the target country. So unless the exporting country drops its price to compensate (which often can't happen at the margins commodities use) then it raises the price locally to pay for the tariffs. If there is a local source, that source can sell anywhere between their usual price and the new price level of the foreign product. Usually what those companies do is just raise their prices to almost the level of the tariffed goods, causing inflation, which again the consumer pays.

The theory is that it gives an incentive to invest in production facilities locally, but what this wingnut has done is change the policies an uncountable number of times and scared the hell out of anyone putting money into factory expansion, because they have no idea what grenade he's going to toss into the foxhole next. Cap that off with firing the trusted sources of information in the administration so nobody knows what's true and what's propaganda, and you have a recipe for stagflation.

It's going to be grim unless he has a heart attack or otherwise mysteriously croaks, because it doesn't look like Americans are smart enough to run him out on a rail, despite his obvious pedo issues.

Good luck!