Hillbilly version: Doubling the cost to make something will be better for me. “Let me see”, bullsh*t.
An exaggeration will explain all I know, which is very little. A tariff will do what it does. The tariff
does not take a position. It is an added tax or an expense to the manufacturer and distributor (in this
simplification they are the same) of a doodad. By it’s nature tariffs increases revenue for the government.
A sales tax is an added percentage at the point of sale. All cost are forwarded to the consumer when the
doodad is purchased by the Suzy homemaker. Assume a tax of 10 percent. If the doodad cost 1 dollar,
then the government gets 10 cents. The same doodad at 3 dollars the government gets 30cents per
doodad. Doodads are essential. You will buy them.
If C makes doodads for a dollar and U makes them for 5 dollars. Both C and U have cost plus mark-up
or profit margin. For this example we are assuming neither C nor U are not over charging the
consumer. U is not going to lower its price because C’s price goes up. Our second assumption is the
profit margin for C will remain constant. C is has a 100 percent per item profit margin (exaggeration).
So, C’s total cost is 50 cents and the price is one dollar (2x.50+1.00).
If a tariff by U of 100 percent is added to C’s doodad then the doodad would cost 2 dollars. Wrong! The
dollar tariff added is a direct increase of cost. Cost went from 50 cents to a dollar and a half. C’s
doodad now cost 3 dollars (1.50×2=3.00). This example is overly simple but it shows the effect of an
added cost and who benefits from that increased cost. U can not cut his price but will sell more because
of better quality or product loyalty, example might be Buy American. What we have is government
supporting U’s business, an increase of revenue to the government, increased cost to the consumer and
C is still making the same return on his investment. Everybody is happy. Well, with the possible
exception of Suzy homeowner. Suzy can’t afford doodads at five dollars. Her budget won’t stretch.