How Tariffs Work

This seems to be confusing to a lot of folks, so here is a simplified expanation. Tariffs have different impacts depending on situations, so I will go situation by situation. Tarrifs are taxes, paid by importers (not the exporters), which make their items more expensive unless they eat the tarriff. (Yeah, right, they will pass it on to the end purchaser.) Since Trump seems to want to level tariffs on all foreign made goods, e.g. Canadian, Mexican, and Chinese (our three largest trading partners), this will be assumed.

All Purchase Options are Foreign Made
In this case, all of these items would have higher price tags. If you go ahead and buy them, you will pay more. If you can’t afford the higher prices, you don’t get to purchase those things. (None of the money paid for the tariff comes from the source; it comes out of your pocket ultimately.)

Many Purchase Options are Foreign Made and they are Cheaper
The cheaper items when tariffed become more expensive. The idea is they become more expensive than domestic items so the domestic items get purchased more often, but if you go ahead and buy them, you will pay more. If you can’t afford the higher prices, you don’t get to purchase those things. (None of the money paid for the tariff comes from the source; it comes out of your pocket.) You no longer have the option of buying the cheaper goods, only more expensive ones (foreign made or domestic).

Many Purchase Options are Foreign Made and they are More Expensive
The more expensive items when tariffed become even more expensive. The idea is they become significantly more expensive than domestic items so the domestic items get purchased more often, but if you go ahead and buy them any way, you will pay more. If you can’t afford the higher prices, you don’t get to purchase those things. (None of the money paid for the tariff comes from the source; it comes out of your pocket.)

In this case, however, as well as in the previous case, if all of a sudden a domestic product’s manufacturer notices that they are now the cheapest option in the market, and all of the other others are more expensive, what do you think will happen to the prices of those goods? History tells us the prices of those cheaper items will inch up, not so much they become more expensive than other choices, but if the other options, say for a dozen eggs, are $3.99 and up and your price for a dozen of your eggs is $2.99, you are leaving money on the table. People are not going to not buy eggs, right? So you bump your price up to $3.50 and you are still the cheapest option, but you are making more money.

Basically, tariffs make items you might want to buy more expensive, even items that are not tariffed. Remember the pandemic price gouging? Do you think domestic producers of goods are not going to take advantage? Do you not think retailers wil do the same? If you think not, you need to stop smoking what you are smoking so you can think more clearly.

Oh, and if we slap tariffs on goods coming from other countries, what do you think those other countries will do? Can you spell “retaliate in kind” boys and girls? Hint at Answer: more price increases.

And, these effects are already very well documented in business history around the globe. Same cause, same effects, no doubt about these things. So why doesn’t the Trump Team care? Apparently their perception is their supporters only care about scoring off their perceived enemies, not in the effect such scores have upon them personally.