this post was submitted on 27 Nov 2024
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Explain Like I'm Five
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The tariffs will be paid by the importing companies, and then it will cause the prices of those goods to rise.
The hope is that this will incentivize and result in more development of the American manufacturing sector, resulting in medium and long term gains.
Short term there will definitely be a cost, paid by us.
Long term the cost will also be paid by us. Prices won't go down when we start producing locally.
Compared to importing for 30% extra? The only reason that would happen is some mass market collusion. The prices will go higher, then manufacturing picks up locally, driving prices down, lower than it was previously - since you don't need to ferry them across an ocean. Foreign goods would be 30% more expensive.
At least that's the theory / how it is supposed to work. In reality, probably a shitton of issues, a new great depression and not much more manufacturing potential as a result. There will be tarrifs on the US too, needlessly closing off trade both ways.
Your first paragraph assumes that labour costs are the same in both markets and that there is little development or tooling cost to setting up that manufacturing base locally. Both are false, and both of those are really the reason overseas manufacturing is a thing in the first place.
Depends on what you are manufacturing. Making shit with mills, CNC, lathes, injection molding? That's not a problem. CMM, EDM and very precise CNC? Yeah, that needs a machine with a high upfront cost. It all depends on if you are able to get customers and if you have the raw resources / the raw resources don't price you out of existence. Overseas manufacture is worth it because it used to be cheap labor costs. You had to fix a lot of things, but it was still cheaper than making it 100% in house. Then China started becomming less competetive and it still was cheaper, but barely. Add onto it a 30% tarrif and the entire equation changes.
Again, it probably will be painful. But we will have to see.
True. There will likely be retaliatory tariffs hurting our exports too. But our exports are smaller than our imports currently, so currently it doesn’t hurt us as much.
The expected benefits don’t include prices going down. They include:
How is it expected for purchasing power to go up if prices increase and wages do not?
It’s expected that wages will, as more US stays within the US economy.
We can do that without import taxes. I deride Biden's CHIPs act as a giveaway to billionaires but it is certainly going to cause chip manufacturers to move their operations to the US instead of China. While I'm not excited about more low wage jobs, I'm less excited about import taxes that codify domestic monopolies and often cost jobs.
How do you figure it would cost jobs? Just less economic activity over all? Importing business just can’t do business any more and goes under? That will definitely happen in some places, if those companies are just barely hanging on.
Monopolies don't need as much manpower as companies in competition. There's less marketing, less customer service, less quality control, and ultimately less production staff. They don't care if the item gets back ordered, if you wait on hold for hours, or you think there's a better product overseas. They don't have to care.
Tariffs alone are not enough. Expanding production is a long term investment, but there's no guarantee a tariff will still exist in 4 years. Its risky to invest capital to meet tariff-induced demand when that demand might disappear before your new factory is even finished being built.
Uncle Sam can mitigate that risk by subsidizing the construction of new factories while the tariffs are in place.
According to this video, Biden maintained at least some of the targeted tariffs Trump put in place before. So there might be some bipartisan support for tariffs across multiple Presidencies.
Unfamiliar with this channel so I can’t vouch for accuracy.
https://youtu.be/lD3FX_wxqUI