Subject: Re: "The Art of The Deal"
Sure, a tariff is a sales tax on imports.

I read a different take that seems to make sense. It went something like this:

A tariff is not a sales tax. Note: Americans know full well what a sales tax is, and how a sales tax works.

1) A tariff is a fee on the supplier, collected by the importing agent.
To the supplier it is just another cost item, along with all their other costs and taxes and fees.

2) The selling price of a product is determined by supply and demand, and has almost nothing to do with what it costs the seller to produce it. The seller's cost just determines if they make a profit, and the amount of their profit.

3) If one of their cost items goes up, they have the choice of raising their asking price. Doing so shifts the supply/demand curve. A rational self-interested seller is already setting his price as high as he can, since the price is actually determined by what buyers are willing to pay. The buyer doesn't care about the seller's costs.

4) The seller basically decides to either take a lower profit or stop making & selling the product[*]. If the seller has been making a handsome profit (remember: the buyer doesn't care about the seller's costs) he is more likely to just take a lower profit.

In ALL cases, it is the BUYER who determines the price of something. If a $100 product suddenly gets hit with a $400 tariff, the price does not go to $500. The price goes to $0 because nobody buys it.

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Of course, one of the things a seller could do is to mitigate the extra tariff cost. In the current instance, one way to mitigate the tariff is to move production to the United States. Which is explicitly what the US is wanting to accomplish.


There's a lot of moving parts in the tariff situation. And a lot of shrieking on the internet. Things change, the equilibrium shifts, and people who benefitted by the old equilibrium do not like the new one and will complain mightily.

FWIW, since the last few days I have become an instant expert on tariffs, after spending a couple of hours in the Univerity Of Google.


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[*] An example is the US sugar tariff. Which I hate. We pay twice the world price for sugar because of that.