Donald Trump wants to "punish" China by putting a tariff on things imported from China.
The problem is that the tariff is not paid by China, but actually paid by the person importing the goods who then passes the cost on to the consumer.
Here are the details.
Tariffs were designed to protect US manufacturers from cheaper imports of similar items. They are intended to discourage trade by raising the cost of importing the items.
Here's an example stolen from You Tube, you have a tee-shirt printing business, and you want to buy blank tee-shirts to print on. China is a good source of inexpensive tee-shirts, so you order them from there. Let's say the price is $10 each. The Chinese manufacturer processes your order of 100 shirts and puts it on a cargo ship bound for the United States. So your initial cost is $1000.
One your boat comes in, to actually get your tee-shirts you have to cover the cost of any import tariff. Let's call it 10%. So your cost is now $1100 or $11 a shirt. What do you do? Raise your price. That shirt your were going to sell for $15 is now $17.
So what happens when some politician decides to "stick-it" to China by having a 100% tariff?
The theory is that it should hurt China because there's less trading with China (this could happen), but without a US manufacturer of blank tee-shirts you're forced to import them from somewhere. Your original $1000 order just turned into $2000 or $20 a shirt which you then sell said shirt for $25 to $30.
Who ultimately pays the price for the tariff? The US consumer. Tariffs raise consumer prices. This is how they were designed. They are both bad and good, but not good if you don't have a US manufacturer to protect.
We're also learning that this is also negatively affecting employees of import companies. The import companies are now buying up as much inventory as they can (before Trump takes power) which leaves no cash left over for any holiday bonuses.
Information source: ChatGPT
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