Tariffs: Explained by Nick Araya

[Tom Dunlap]

Let’s say they put a 30% tariff on climbing lines made in Europe. Those ropes cost us right now $150. The manufacturer is maybe selling it to arbsession for $75 and making $30 on the sale. so the mfr is not just going to eat that $30 because then they’d be working for free or at a loss.

So now arbsession has to sell the same rope for $180. $150 gets split between Casey and courant. $30 goes to the federal tariff fund (that’s not really a thing but it’ll go to wherever tariffs actually go).

So you’d like to think that would encourage us all to buy American….which is the point. But that’s not how it works.

So you’re on the website, and you notice a courant rope for $180 and a Yale for $150. You buy the Yale. Someone else buys a Samson rope for the same reason. Courant sales stagnate for a second. Then Samson and Yale notice their supply is dipping. Demand is on the rise because of the price imbalance.

What does Yale and Samson do? They raise their rates. Those rates have been held steady for years by market pressure because tree workers are cheap. But all of a sudden, in one fell swoop, climbing ropes went from $150 to 180….for the same damn rope.

You and me aren’t getting anything extra for that extra $30. But Yale is making more money, Samson is making more money, the federal govt is making more money. It hasnt actually had the effect of reducing sales of courant rope because after a minute, the market has balanced the prices of all foreign and domestic rope. We’re back to square one with the only noticeable impact being the prices are pulling more money out of your pocket and giving it to the people in power all while making us think we’re supporting America.

And if that ain’t the best damn explanation…

 

[evo]

Yup, a domestic subsidy makes more sense. Then there are the goods that aren’t manufactured in the US at all anymore. Or if they are it’s so limited the domestic option is not only poorer quality it’s x3 the price for the made in USA sticker….
That and we get shafted on other things like the new affordable Toyota helix truck. Toyota doesn’t want to jump through our hoops so they just say too bad..

Chicken tax - Wikipedia

en.m.wikipedia.org

 

[Matias]

Yup, a domestic subsidy makes more sense. Then there are the goods that aren’t manufactured in the US at all anymore. Or if they are it’s so limited the domestic option is not only poorer quality it’s x3 the price for the made in USA sticker….
That and we get shafted on other things like the new affordable Toyota helix truck. Toyota doesn’t want to jump through our hoops so they just say too bad..

Chicken tax - Wikipedia

en.m.wikipedia.org

I have been dreaming of having a diesel Hilux for 20 years. One day...

 

[NickfromWI]

thank for the share, Tom!

love
nick

 

[Tom Dunlap]

YVW

Your explanation puts it in terms we can understand

 

[Mick Dempsey]

Ok, hadn’t thought of it like that.
Thanks.

 

[flushcut]

I’m down to become a rope smuggler.

 

[Serf Life]

I’m down for a domestic tariff on healthcare cost.

 

[Matias]

I’m down for a domestic tariff on healthcare cost.

I'm not sure I follow... ?

 

[Serf Life]

An ill-formed terse joke on what impacts most US citizens more than the cost of rope/steel/cars. Promising lower cost of bought goods (which Nick eloquently explained as short lived), while we have the most expensive medical care and 1/3 of adults have upaid med bills.

 

[Matias]

right on. I thought perhaps you were suggesting that the people who seem to be able to afford not only basic healthcare, but cosmetic surgery and premium level care should pay a tariff of sorts to fund healthcare for people who couldn't otherwise afford it, which is a "tariff" I would support.

 

[Rusticus]

Let’s say they put a 30% tariff on climbing lines made in Europe. Those ropes cost us right now $150. The manufacturer is maybe selling it to arbsession for $75 and making $30 on the sale. so the mfr is not just going to eat that $30 because then they’d be working for free or at a loss.

So now arbsession has to sell the same rope for $180. $150 gets split between Casey and courant. $30 goes to the federal tariff fund (that’s not really a thing but it’ll go to wherever tariffs actually go).

So you’d like to think that would encourage us all to buy American….which is the point. But that’s not how it works.

So you’re on the website, and you notice a courant rope for $180 and a Yale for $150. You buy the Yale. Someone else buys a Samson rope for the same reason. Courant sales stagnate for a second. Then Samson and Yale notice their supply is dipping. Demand is on the rise because of the price imbalance.

What does Yale and Samson do? They raise their rates. Those rates have been held steady for years by market pressure because tree workers are cheap. But all of a sudden, in one fell swoop, climbing ropes went from $150 to 180….for the same damn rope.

You and me aren’t getting anything extra for that extra $30. But Yale is making more money, Samson is making more money, the federal govt is making more money. It hasnt actually had the effect of reducing sales of courant rope because after a minute, the market has balanced the prices of all foreign and domestic rope. We’re back to square one with the only noticeable impact being the prices are pulling more money out of your pocket and giving it to the people in power all while making us think we’re supporting America.

And if that ain’t the best damn explanation…

That is a great explanation. Makes me think, in your example, that $30 tariff could used to incentivise Samson and Yale to keep up with demand somehow. Maybe that would actually help substantiate the tariff amount.
With the higher prices of the three manufactures in your example, what are the chances them being over priced would allow for a newcomer to come in and undercut all of them?

Interesting and timely discussion...

 

[surveyor]

Also imposing tariffs, can result in retaliatory tariffs, hurting US companies who are trying to export.

 

[treegongfu]

Better not put tariffs on the BDB!

 

[surveyor]

Sadly, many countries import duty taxes are already excessive.

 

[ghostice]

Just look at your neighbours to the north. The Canadian government exercises a virtual orgy of taxes, duties, forms to fill out that make shipping into the country a nightmare, bank exchange and credit card fees and on and on such that, with all of this and now our 72 cent dollar against the USD (gasp that's right) you can pretty much just take the quoted price for anything on a US website and DOUBLE it ! I'm all for protecting a country's own industries but Canada Doesn't Really Make Anything Anymore ! So what started as a duty, more or less just to protect businesses in Quebec, now has broad catagories that apply to all stuff across a sector. And so it goes, round and round compounding inflation and the screaming cost of living in what's fast becoming a little backwater country. Why can't we buy inexpensive Japanese or Asian flat bed pickups that seem to work fine over there? All we get here is jazzed up "rust easy" tin that is full of airbags and dumb electronic garbage. Get back to basics guys. If the NA auto industry gets wiped out by the Chinese, they have only themselves to blame. End Rant.

 

[27RMT0N]

The Wall Street Journal made a pretty easy to understand 8 minute video recently that's worth a watch.