Why Is The Tariff Issue Controversial?

The very first few posts were criticizing how the tariffs will only raise prices for the American consumer, and then you started barking. I probably conflated your barking with other posters' barking. Apologies.

Perhaps you were but it got blurred with all the "ZMOG! You guys are idiots" sentiments.

So in the interest of clarity and having it in all one place, please answer these yes/no questions and feel free to elaborate on why:

1 - Do you think the proposed tariffs will raise prices for US consumers on those products?

2 - Do you think the proposed tariffs will force China to pay more to manufacture those products?

3 - Do you think the increased US government revenue from proposed tariffs will benefit the average American?

Replace the word "posting" in your comment with "arguing," and you sound just like my wife 😃

When we have double digit inflation from tariffs and deportation and are in a huge recession/depression and supplies of many things that we all take for granted and have increased quality of life for average American are super hard or expensive to find, at least rickroll can sit back and smugly say “I never said it’d help consumers”

Regarding the bolded part: not really.

Although tariffs will make a given domestic sector artificially (and I stress artificially, but not actually) more competitive, they simultaneously disadvantage downstream domestic industries. If you tariff Canadian steel, you make US steel producers happy, but you make US auto manufacturers sad because now they'll pay more for both Canadian and US steel (Canadian steel due to tariffs, US steel due to price gouging). That means either smaller profit margins or lower sales for Ford, Chevrolet, etc, who then have to lay off US workers. In the end, it's a wash for US workers writ large, because any gains are offset by losses elsewhere.

Moving your wallet from your left pocket to your right pocket doesn't make you richer.

I know there's a lot of political chatter about tariffs but setting that aside to detail HOW they actually work in practice from someone who actually deals with them. Yes this is a wall of text but I went easy on you.

First understand that all imports are categorized and assigned a number called an HTS code. Toothpaste has a code, TVs have a code, raw steel has a code, artwork has a code. They look like phone numbers kind of. You can find this stuff on the Harmonized Tariff Schedule. https://hts.usitc.gov/

8701.10.0100 for example would be how a single-axel trailer would be categorized. Importers sometimes don't categorize perfectly but the point is the code is where any existing tariffs are and what rate of import duties there might be.

When tariffs are assigned they can be for an entire country's or for certain ranges of items from that country. You can ban them or assign whatever percentage you want.

Typically most commercial imports are ordered weeks or months (for more complex things like specialized industrial machinery, sometimes years) before they arrive in port. A lot of these orders would naturally have taken place before this weekend or before Trump was elected. This is very important for the short term because it means they buyer agreed to a price earlier, and which party is to eat the new tariffs subject to contract terms, they have something called incoterms but point is many US folks getting stuck with a new bill that will affect their revenues this year.

Anyway a few days before arrival in port or when the cargo flying by air, some party with the importer (they, or maybe their Customs broker) completes and submits the paperwork for Customs clearance. Based on the products, how much of it, where it's from and some other factors you pay the import duties and whatever tariffs there are. Most anybody who read this far already knows that the exporter doesn't pay this strictly speaking.

So with these tariffs the very first thing people are looking at are alternate sources and suppliers, but that's easier said than done. First because while say Vietnam might produce the same items, they may not be able to meet the quantity or quality or timeliness or price you actually need (and if they could, then everyone else in your business is calling them too).

What this also does is depress the shipping lines & cargo airlines as in the aggregate they get less volume. Which in turn effects everyone in the freight type industries from the ports to the local truck carriers. You saw this in the early Covid shutdown days before everybody in the US started buying everything all at once, they were letting people go at airlines, truckers weren't getting work etc. Shipping rates will drop a bit but some people lose their jobs too as there is less import freight.

In reality what tends to happen (mostly, at least in my experience) is the importer can't find an alternative source that makes more sense than just dealing with the tariffs. In the end they're just going to have to raise prices to whoever they're supplying to offset most or all the cost, and if that party want it that's how it is since every other importer of that product is doing the same thing.

There are also some possible workarounds, for example you can change the country of export from China to another country if "meaningful" further processing of the product takes place elsewhere before exporting to the US. As in, you can't take a product made in China, ship it to Cambodia and place a decal on it and declare Cambodia as the country of origin. But if you set up something where you're doing real value-adding production work or assembly in Cambodia you can. You'd obviously need to make sure this is worthwhile versus just paying the tariffs though.

I guess the idea here is supposed to be punitive, because a lot of the import items affected aren't going to ever be produced in the US. You can definitely make the case for some particular industries but those are exceptions and even in those cases will take a while.

In the aggregate what we always see in the end are depressed sales, even for so-called inelastic products, and lower margins. It's one thing for me to say the importer has to eat it and then make the customer eat it in turn, but everyone has their limits, and basically nobody has margins so big they can just absorb 25%. Apple maybe, but good luck with that.

I've seen people point out that some of the US industries and people will benefit, which is true (and full disclosure, I'm definitely one of them, obscene as it is). I'm very skeptical that it will be enough to offset losses elsewhere but I've only done analysis withing my tiny slice of things, not for the entire economy. Even in my own little bubble I've seen people lazily dismiss it as a "wash" but thankfully we don't leave this kind of work to the VP sales or head of IT.

The second biggest problem I have with the entire topic is how narrowly it's presented. Yes, avocados mostly come from Mexico. No, avocados being subject to tariff aren't a huge concern. We're not a guacamole-based economy. We're not even an economy that depends on imports for food (though by a small bit we are a net importer lately). If anyone here in the news media please stop with the god damn avocados. What concerns me is everything affected that falls outside of like 5 or 6 imports that get all of the attention. Sure the auto industry, oil prices and lumber justify special focus for obvious reasons, and everyday people can relate to TV prices and avocados, but the scope is insanely broader than that. A lot of raw unprocessed materials US-based factories need to make things for example come from China, like plastics and polymers.

Anyway, now being only slightly political, I think if you're going to undertake these types of drastic measures they should be very surgical. What I'm seeing right now and in years past (as in, not just Trump) looks poorly-considered and arbitrary. If the idea is to force new negotiations sure I get it but as a longer-term effort this looks very sloppy. There are cases and anti-dumping restrictions for things to prevent foreign countries from destroying out industries by flooding our markets with huge amounts of cheap stuff, which make total sense, but they're highly specific and essential in ways you can clearly evaluate. A classic example is garlic from China if you look up the history on that. This looks like reckless slap-fighting putting our economy (and other's) in real jeopardy. YMMV

The chinese tariffs will be mooted/null in effect through exchange rate effects. 10% isn't too much, last time China did the same, just led the yuan slid a bit.

They are a whole ball of nothing for now.

The tariffs with mexico and canada are insane and will wreck many sectors

Nice work, Gonz

I read somewhere there is some weird loophole with China where you could import from China in small increments to avoid import taxes, and everyone does this, including Amazon. And this policy will close this loophole, and it will be a big deal. But I dont know if this is true or not.

there's def a de-minimis thing where imported packages under a certain value are not taxed, and certain companies have taken advantage by structuring their logistics in such a way that nothing goes above the limit. its one of the reasons that temu and shein have been so successful. no idea if this latest piece of legislation stops it, but i hope it does

de minimis is minuscule, that's not the issue. But if exchange rates stabilize at 5-6-7% lower than the pre-trump avg with a 10% tariff we are talking close to nothing for China.

Canada and Mexico otoh ....

I suspect you're referring to either informal entries. If the total commercial value amount very small I think $2,500 or under, or $800 for China, you file as informal and pay only a minimum basic fee.

A lot of times you would use this if say you are re-importing empty chemical tanks with some residue left in them that needs to be cleaned out, which isn't really importing product. Or maybe shipping testing samples of product with little or no commercial value.

I'm not the best person to address it, at my very industrial scale it would be very impractical and unwise to abuse this and I've never seen it as a real problem. I mean if you're paying $3,000 to ship a container and your Customs entry declares the commercial value is worth $500 without some obvious justification, that's kind of a red flag for CBP, and you can probably expect invasive inspection, which you also have to pay for. And since whoever might be handling the import for you themselves have a legal Duty of Care, they would certainly question the hell out of it. Certainly don't want to tool with CBP if you're an import-dependent company. They are actually one of the most powerful government agencies in terms of being able to enforce things on the spot.

That said, who knows what tiny fly-by-night importers do, I'm sure little China-based sellers hawking cheap stuff on Amazon or eBay do all kinds of BS. There's only a million of them and I doubt most are worth much of CBP's enforcement efforts individually so I don't know it's probably fine to close whatever you need to on it. Just understand that lower-income shoppers will pay a little more for their $1.98 water bottle or whatever

More broadly speaking, I've seen half a dozen pieces so far this weekend from media outlets of a certain persuasion talking about how other countries and individual companies do not pay for tariffs, and that everything is always passed on to the consumer. I found myself wondering why we don't get the same stories published when people scream for confiscatory tax rates on corporations or the people who run them. Taxes = good, make corporations and rich people pay their fair share. Tariffs = bad, my toothpaste will be too expensive. It's nonsensical.

This cannot possibly be Trump's endgame strategy. Gonzirra pointed out how disruptive this is for smaller players, and glossed over the fact that most of these important products can't really be spun up inside the USA very quickly.

On the other hand, look at how much complete and utter garbage we import. If every dollar store in the country closed tomorrow, we'd all be better off. If enormous tariffs are what it takes for people to stop buying disposable plastic bullshit to fill their closets and cabinets with, is that so bad? Look around you right now. I bet you can identify 20 things that you have absolutely no use for, and probably came from overseas.

That's why I agree that this is a pretty terrible approach. This should've been more surgical.

Trump just announced that Venezuela is now willing to take back illegal immigrants for unnamed concessions from the US.

Knowing Trump, Venezuela probably made off better in the deal than the US did. Seems with Trump if you just give him the symbolic publicity win you can normally come out ahead.

So basically doing the opposite of what Trudeau is doing, where he is doubling down on the cost to Canada just to show he won’t be bullied.

the biggest loophole is chinese companies are shipping their stuff to vietnam first and then to the USA

2 months from now

TRUMP: "I know you are hurting, but Canada is hurting worse"
Ave American: Remind me why were are hurting Canada again? Is it because they sell us stuff?
TRUMP: It is about fentanyl
Ave American: Really?? It sounds like you need to find the US guy who signed the USMCA deal. If we need economic tariffs, and are going to blame fentanyl, it seems like an excuse for a failed USMCA deal. Was the USA negotiating team full of DEI hires? Just fire the guy who signed the deal.

You mean making billionaires more money at the expense of ****ing over American citizens?

That's always been his endgame strategy. You have a better reason why he tweets out a "heartfelt" message about the 2nd plane accident and finishes off with telling everyone to buy his shitcoin?

why would American billionaires make more money with 25% of tariffs with Canada?

Because they have business interests in the sectors benefiting from protectionism. Tariffs are wonderful for helping your cronies increase their profits and market share without actually having to innovate or become more efficient. That's one of the reasons tariffs are a terrible idea -- they allow corporations to be lazy instead of incentivizing them to better themselves.

they have business interests in sectors that use the protected goods in their production function as well, and all of them lose out.

for example any house builder loses money with Canadian tariffs.

there is no reason at all to think that billionaires in aggregate are better off with tariffs. it's just a completly illogical claim to make. some gains in some sectors, everyone else lose, and they also lose in aggregate because their consumers are poorer in real terms.

tariffs aren't a 0 sum game between capital and labor. tariff are a negative sum game between a few sectors (capital AND labor in those sectors) and every other citizen (and all other capital) in the country.

that's why tariffs are bad not because they help capital over labor.

lol that Trump has a strategy more than 2 days into the future.

You'll get no argument from me there. Tariffs are indeed stupid for a whole litany of reasons.

I think it's also quite possible that some of the billionaires behind Trump are not in favor of a trade war at all. But they're also not the president.

Since both the CA and MX tariffs are suspended for now guess we'll see where it goes.

Another thing I'll add, and this is more of a personal gripe, but if you're going to do this it would help domestic businesses tremendously to set a timetable a little more in advance. CBP, brokers, importers need to adjust for this kind of thing. I get more notice on Netflix price hikes.

He has the most important billionaires of the country behind him this time. Tech, finance. Soros and Bloomberg were titans in their prime but they are just a shadow of themselves now.

Power has shifted allegiances. Many people who sided with democrats are with Trump now. They are the biggest sharks in the pond of life. The winners who assassinated all competition in front of them for decades. The masters of the universe. The people who call the shots.

Trump bluster. 25% tariffs on Canada and Mexico ain't happening.

Trump supporters love the bluster. They don't care if he does what he says ..... they just love his braggy authoritarian manner.

Tariffs from trump were always about power far more than economics. Countries and their leaders will toe the line and bend the knee or else.

This is true. My mother-in-law's boyfriend and his friends all think Trump is great. They know most of what he rants about might not happen, but they are convinced he's four steps ahead of everyone else and can't wait to find out what happens. But they are sure it will be good.