Democrats to increase debt ceiling by $2.5T

[Kamaji]

Every penny paid in tariffs was paid by Americans. Period. The only way to avoid that added cost was to change supply chains. It takes years to move production and redesign products to use different components. Some of the supply chain collapses right now are due to this disturbance in moving supply chains out of China without enough capacity in place to pick it up.

No, that does not necessarily follow.

It only follows if there was no change in the aggregate price, or the aggregate demand, for the goods subject to the tariff.

Very simple example:  assume that, ex ante, Buyer is willing to pay $100 for Good X, but is not willing to pay $120.  Further assume that Seller's COGS for Good X is $80, so that Seller expects a pre-tariff profit of $20 on a sale.

Now assume that a tariff equal to 30% of the pre-tax price is imposed.  The cost to Buyer will be $130 = $100 plus $30 tariff, which Buyer is not willing to pay.

One of two things will happen:  the sale will not take place, in which case both parties are worse off, and in particular, Seller has lost a potential $20 profit.  Alternatively, since Seller most likely already has significant sunk costs in producing/acquiring Good X, Seller will reduce the price so that Buyer is still willing to buy.

Assuming that Buyer is still willing, at the margin, to pay $119 for Good X.  Seller will therefore be willing to reduce its price to $91 in order to make the sale.  As a result, Buyer pays $119, Seller remits $28 to the government, and Seller retains a net profit of $11.

Thus, in this hypothetical, both Buyer and Seller have borne a portion of the cost of the tariff.  Buyer has borne $19 of the tariff, and Seller has borne $9 of the tariff.

Even if goods are already in transit and pricing has been nailed down, depending on the relative bargaining positions of buyer and seller, the sales contract may have a taxes provision in it that allocates the burden of any additional taxes between the two parties.

So, no, it is not a categorical consequence of tariffs that the buyer - i.e., Americans in this case - always economically bear 100% of the cost of a tariff.

This econ lecture explains a little more about the differences between statutory incidence and economic incidence of a tax:  https://scholar.harvard.edu/files/stantcheva/files/lecture3.pdf

[roamer_1]

In other words, your claim is that (a) the demand by American buyers was substantially less elastic than the supply by Chinese sellers, and (b) there was no ability to engage in goods substitution to avoid the tariffs.

Not sure if I buy that argument as a categorical.  I would go along with the assertion that, because of economic realities, more of the economic cost of the tariffs were borne by Americans, at least initially.

Hold on now... Every cent of the actual money paid out against a tariff is exactly paid BY THE BUYER.
The harm caused to the company or nation the tariff is imposed upon is incidental to the fact, and is wholly made up of lost sales - futures - and not any of the real cash.

[roamer_1]

I thought we were using tariffs to raise the consumer price of products produced in near slave conditions so our companies could compete with American made equivalents.

Regardless of the why, the actual cause/effect of tariffs is a direct tax upon the American people.

[Kamaji]

Hold on now... Every cent of the actual money paid out against a tariff is exactly paid BY THE BUYER.
The harm caused to the company or nation the tariff is imposed upon is incidental to the fact, and is wholly made up of lost sales - futures - and not any of the real cash.

You are confusing economic incidence with statutory or nominal incidence.

If the effect of a tax is to lower the pre-tax price, then a portion of the tax has been borne by the seller of the taxed good, even if the buyer is also economically bearing a portion of the tax.

This happens will all sorts of taxes, and regardless of the person on whom statutory or nominal incidence is placed.  It happens with sales taxes, it happens with income taxes, it happens with payroll taxes.

How the ultimate economic cost of a given tax gets borne can take a while to sort out, primarily because there are lots of fixed elements in any complex economic transaction, lots of moving parts, and varying degrees of bargaining power.   But ultimately, the cost will be parceled out amongst the various actors in any supply chain.

[roamer_1]

You are confusing economic incidence with statutory or nominal incidence.

If the effect of a tax is to lower the pre-tax price, then a portion of the tax has been borne by the seller of the taxed good, even if the buyer is also economically bearing a portion of the tax.

This happens will all sorts of taxes, and regardless of the person on whom statutory or nominal incidence is placed.  It happens with sales taxes, it happens with income taxes, it happens with payroll taxes.

How the ultimate economic cost of a given tax gets borne can take a while to sort out, primarily because there are lots of fixed elements in any complex economic transaction, lots of moving parts, and varying degrees of bargaining power.   But ultimately, the cost will be parceled out amongst the various actors in any supply chain.

That's all right enough... Except in that the punitive value of the tariff is meant to punish the bad actor... If the bad actor lowers its price to absorb the tariff, it just invites a further increase in tariff. Spankings are administered for a reason.

[Kamaji]

That's all right enough... Except in that the punitive value of the tariff is meant to punish the bad actor... If the bad actor lowers its price to absorb the tariff, it just invites a further increase in tariff. Spankings are administered for a reason.

Then the tariff ultimately gets to the point where no sale is made, and everyone is worse off.  However, since the seller still has the rest of the world to sell to, the only ones worse off are the Americans.

Punitive tariffs designed to stop trade do end up hurting Americans, as the early experience with beggar-thy-neighbor tariffs demonstrated.  Smoot-Hawley, anyone?

[roamer_1]

Then the tariff ultimately gets to the point where no sale is made, and everyone is worse off.  However, since the seller still has the rest of the world to sell to, the only ones worse off are the Americans.

Punitive tariffs designed to stop trade do end up hurting Americans, as the early experience with beggar-thy-neighbor tariffs demonstrated.  Smoot-Hawley, anyone?

That's right. Same page 

I am not exactly against tariffs mind you. But they must be seldom administered, and with great care.
Unintended consequences.

[IsailedawayfromFR]

Nothing good comes from this.

Nothing.

[IsailedawayfromFR]

Who Pays Tariffs?

https://www.ipi.org/ipi_issues/detail/who-pays-tariffs

[Kamaji]

Who Pays Tariffs?

https://www.ipi.org/ipi_issues/detail/who-pays-tariffs

That's nice, but it doesn't gainsay the underlying issue of economic versus statutory incidence.

A "surprise" tariff that is imposed without warning on goods that are in transit, and for which the payment terms may have already been set in stone, may not result in a divergence of statutory incidence and economic incidence when the tariff is collected on those goods, but every other subsequent shipment will take into account the fact that a tariff - an economic wedge cost - will be imposed, and, depending on the relative elasticities of the various parties, and the relative bargaining power, the economic burden of those tariffs will be shared in some proportion between the various actors in the transactions.

Getting fixated on who gets tagged as "it" by the statute, or who has to write the check to the government, is misleading and results in the true economic cost of a particular tax being missed.

[Fishrrman]

It's kinda amusin' to watch the back-and-forth in this thread.

That "$30 trillion" (by next year it will be $35 trillion) cannot and will not ever be "paid". Not in the traditional sense of the word, and not with "dollars".

Past a certain point (one previous poster mentioned $20 trillion), it's no longer real money, but simply "a number".

And that number will keep goin' up, up, up, up, up, up, up... until it can't any longer.

When that day comes (could be ten years, could be twenty years, could be thirty years...) then -- and ONLY then -- will the people who "have the power to do something about it" actually ... do something about it.

And I can guarantee you, that you're not gonna like what they do...