Anyone making decisions to shift production to the US based on haphazard, changed-on-a-whim tariff structures would be crazy. Even some repubs are saying it’s just a negotiating tool (bluff really) - what multinational is making a long term (very long payback) manufacturing investment on that basis?
Surely, removing tariffs can close manufacturing businesses fast, but adding them can’t create manufacturing businesses at the same speed.
I guess if the tariffs stay high for a very long time, increased manufacturing might eventually start to happen slowly . In the meantime volumes go down, and prices up - and consumers pay more.
I saw a clip that said last time he was in power, new tariffs on washing machines produced extra treasury revenue of less than $100M, but cumulative price increases were over $1B! Seems too imbalanced to me, but anyway if you reckon any tax cuts from tariff revenue are going happen, or that if they did they would be a net benefit to average joe - I’ve got a large supposedly green country to sell you.
My relative in the states gives the example of a rival company who moved production to Mexico, (cheaper labour costs), but are now subject to tariffs - losing what advantage they had.
Tariffs are an indirect tax, so Trump could reduce income tax for lower incomes so that they can afford higher prices.
The only people better off would be the wealthy.
To add , think about US buyers moving into the allied health and aged care sector business, through to death. For instance, I’d heard that White Lady Funerals was US owned.
I agree there is a lot of truth in this. I’m probably wrong but I think they wanted their old manufacturing jobs back, not new economy jobs. They are living in the past. The US has a comparative advantage in many industries and needs to focus on this.
By all means be more self-reliant - I wish Australia was!
There are ways to reform your economy. The inflation Reduction Act was aiming to do this.
Tariffs are lazy and dumb. Just like MAGA.
Edit: Weren’t Scranton doing very well out of ammo to Ukraine?
Yes, Invocare which owned White Lady, Simplicity funerals and a few others including pet cremation mobs sold to a US PE firm a few years back. The big US PE mobs have their fingers in everything
The difference between the tariff as a tax and indirect taxes such as retail/wholesale taxes on goods ( as we used to have) plus the VAT/GST taxes on goods and services, is that such internal indirect taxes apply equally to imported and domestic products.
Political appeal that we are only taxing them foreigners when we use the tariff ( leaving out the bits that the importer pays the tariff, with it cascading to the domestic consumer in higher prices)
I think trump honestly believed that all of the tariff will get eaten as reduced price by the exporter. Which is crazy, but he’s a simpleton. And that the volume of goods won’t change, so all tgat tariff revenue will magically appear at no cost to anyone in the US. This is why he didn’t understand what he was doing to us carmakers. And why he thought it was free money. No-one’s been prepared to explain that the emperor’s clothes do do the job in this case. Or he’s isolated those voices.
How much longer he can blame Biden or nefarious overseas countries for not delivering his promised reduced prices “from day 1”, and how much longer he can keep lying about it (eggs, 30% up, while he claims they are 30% down!) will be interesting.
Which explains Whitlam’s bold move for a 25% tariff cut, later followed through by Keating tariff cuts. The tariffs hurt the Australian consumer in high prices.
Australia finally abandoned the flexible tariff linked to the basic wage. The bad old days when Alf Rattigan at the Tariff Board ran the economy and trade policy before we transitioned to the IAC and the Productivity Commission.
Not quite. A VAT or GST is levied on the end consumer based on the retail selling price. A tariff or import tax is charged to the party/company bringing in the goods from overseas - it’s charged at the wholesale price at point of entry into the US and normally levied/collected by customs….ie you pay your duties and your goods are released from customs.
The question will be how much profit margin is currently being made by parties/companies importing the goods into the US. I think Trump believes and hopes there are big profits being made and these companies can absorb some of the tariffs and that they will only pass on some price increases to their customers. He keeps saying the US is being ripped off.
I don’t think 100% of the tariffs will automatically just be passed on to consumers because that will ultimately reduce demand for particular products in the US and volumes will fall for the companies importing products into the US. This will have a flow on effect to production for many of these companies. As volumes fall the price per unit of production for these importers may increase - as you have less volumes/products to spread your fixed cost base over.
The importers will look for alternative markets to potentially sell their products into, but that may also require them to drop their selling prices in order to make up for volumes lost from a decrees in US sales. Them the importers will look at it holistically - do I keep my volumes up and absorb some of the tariffs in the US (delivering lower margins) or do they chase new markets potentially at lower prices/volumes.
Then there is the curve ball of what happens to the US $ which may in part be linked to interest rates. The US$ could impact everything I said above both positively and negatively.
Pricing imported products at below cost to maintain or improve market share will set off anti dumping investigations, possibly also countervailing investigations, which have a chilling impact on competition. Once anti dumping and countervailing duties are imposed, it takes years to get them off. The US is notorious for its recourse to anti dumping and countervailing action under so called unfair trade remedies. It took years for us to negotiate for application of the injury test to Australia in AD and Countervailing.
Latest Trump on Greenland:
Just because a boat landed there a few hundred years ago doesn’t mean Denmark owns it. It’s a long way from Denmark and Denmark can’t defend it.
We have two bases there and we need it for national security, Maybe we need to get NATO involved. We might need to send soldiers there?
