Who Actually Pays the Tariffs?
A common misconception is that foreign countries pay the tariffs imposed by the U.S. government. In reality, when goods arrive at U.S. ports, they are held until the importing company—often a domestic business—pays the required tariff. This means that the financial burden falls directly on U.S. importers, not the exporting foreign entities. And of course, the higher cost of goods means higher retail prices once these products hit shelves.
The Challenge of Domestic Manufacturing
The rationale behind imposing tariffs is to make imported goods more expensive, thereby encouraging companies to manufacture products domestically. However, this is far more difficult than it sounds. In many instances, the infrastructure or expertise to produce certain items simply doesn’t exist in the U.S. Building out these factories could take years, if not decades. Will tariffs that almost everyone agrees will not be permanent be enough of an incentive for businesses to risk spending the billions of dollars required to rebuild our manufacturing?
How Much Does it Cost To Make It In America?
I've tried to produce multiple products in the United States and each time it's failed. The factories simply do not exist here, but the few that do charge substantially more than working with a factory overseas. In my experience, manufacturing costs 8 to 12 times more in the USA than having it produced in another country and shipped in. This means that tariffs need to reach 800% before it would become cheaper to have a product made in America. This of course isn't feasible, as consumers would never buy products for 8X the price, and at those rates, the businesses and products would cease to exist.
Also it's important to remember that, products "made in America" are still currently made with foreign materials using foreign-made machines. Blanket tariffs would hit every business and factory for decades even though they were manufacturing products locally.
My hot sauce brand Oliveum is cooked and bottled in the USA but the bottles themselves are Chinese-made. A few commenters on my video said that I sold out my country by having my hot sauce bottles made in China. They fail to realize that every hot sauce bottle in America is already made in China.
How Much Will Tariffs Affect The Cost of Photography Equipment
Tony Northrup made a great video breaking down the cost increases we are about to see on camera gear based on their country of origin.
Impact on Camera Gear
The photography industry is particularly affected by these tariffs, as many camera manufacturers produce equipment in the countries facing higher duties:
• Canon: Manufactures in Japan (24% tariff) and Taiwan (32% tariff).
• Nikon: Produces in Thailand (36% tariff) and Japan.
• Sony: Operates factories in Thailand and Japan (24% tariff).
• Fujifilm: Manufactures in China (34% tariff) and Japan.
• Olympus (OM System): Primarily produces in Vietnam (46% tariff).
A Deeper Dive Into Trade Deficits, Tariffs, and How They Were Calculated
Ben Shapiro recently came out with a video that goes much deeper into these tariffs, and how they appear to have been calculated based on trade deficits, rather than being "reciprocal."
I would love to be able to easily and affordably manufacture products in the United States. Proponents of these tariffs seem to believe this is right around the corner. I hope they're right.
It's maddening. I've spoken to a number of people who think the foreign country pays the tariff. No, they don't. Worse yet is that these tariffs do not protect any US industries since pretty much the entire consumer camera and lens industry is overseas, mostly in Asia. And we will never, in the US, have those industries domestically. So these tariffs are idiotic and counter productive, like tariffs always are.
All you downvoters, let's hear your counterargument. What David wrote above is spot-on. American consumers ultimately pay the cost of tariffs. It won't be long now before prices on camera gear go up 25%-50%. And, there is no infrastructure in the U.S. to support the re-emergence of an American camera industry.
Vietnam cave in and proposed 0% tariffs on US goods. Caveman refused, now everyone is puzzled - what the hug he wants?
What he wants is a regressive tax system that frees men like him from the undue burden of contributing proportionally to the good of the nation.
You're one of those men who wants to benefit from a well-functioning nation but doesn't want to pay his fair share to support it? Selfish much?
I was talking about anti-social rich freeloaders. You're one of them?
We are fine with that in Europe. We don’t raise tariffs and our prices will remain the same. For our trade partners nothing will change too.
Thank you, Lee! Hopefully it will open some people's eyes to the absolute stupidity at work here.
Are we great again?
Milton, In Trump We Trust. That's the next executive action
"In Trump we trust". Hmm. A convicted felon who has been bankrupted several times in his personal life, given free reign to manage America's economy. Scary stuff!
I pledge the 5th ... No comment! And you forgot to capitalize the W, and T Ha, haa ha ;)
Trump is our Lord and Saviour. For thine is the federation, and the power, and the glory, forever. Amen.
By the look at the down votes, apparently not. LOL
Cool. Still down votes.
For tariffs, the current strategy seems to be forcing other countries to the negotiating table. For example, in the past when they wanted to do USMCA type trade deals with many other countries, they refused as the existing terms were far in their favor, and USMCA would have them significantly lowering tariffs.
Currently a common global market outcome is that many nations have far better trade deals with each other than with the US. Furthermore companies do not like costly redundancies. The end result is a global trade field where the US in exposed to the full brunt of various high CET schedules while those same nations have many agreements with each other where tariffs are far lower. The end result is if you are a US company and you want your "Made in the USA" items to be sold in foreign markets, you will face very high tariffs where you will not be able to make your items competitive in those markets. On the other hand a company ready to expand globally will see that they could simply fire all of their US factory workers, and move the factory to a different country, and instantly have cheaper access to those global markets. The outcome from these policies as seen over the past few decades, is a hollowing out of national manufacturing, especially if they can simply move the factory outside of the US and instantly have far fewer trade barriers, and still maintain effectively free access to the US market. Anyone looking to expand globally would be crazy not to fire their US production staff.
The reason why the 1/2 reciprocal tariff method is being used, is that the countries with the highest tariffs with the US, also have a large industrial sector where their business model revolves around exporting to the US, this means that those are large segments of their economy that are not flexible, and will be unsustainable in that form if the US imposes similarly high tariffs.
This is why we now see a number of foreign countries now pushing for new trade agreements with a goal of tariff-free trade. Each nation that agrees to those terms, subsequently means that they become a nation where US based companies can access their market without the need to move their production out of the US. One of the first manufacturing hubs in the process of establishing such trade deals, is Vietnam, which a number of electronic manufacturers have moved to, especially networking equipment makers (after issues with those manufacturing segments in China).
Furthermore with the new tariff policy, semiconductors are exempt.
Overall the policy is structured to minimize impacts to popular items that aren't pure luxury, while maximizing impacts on those inflexible foreign industrial sectors. It is wreaking havoc on those economies since it is risking widespread collapse, and that is causing those governments to rush for a trade deal, and with a global policy, it discourages those nations from using many workarounds for them, while also subjecting the highest tariff nations to the same hollowing forces that they subjected the US to, by forcing those companies to quickly move production out of those nations and fire workers.
Aside from that, a push to bring more manufacturing back to the US is a 2 prong approach. First is lowering corporate tax rates to be more in line with the rest of the global market, otherwise companies will move their tax home to foreign nations (hence why so many of the highest valued US companies moved their tax home to Ireland). The second part is addressing global trade barriers that make it very difficult or even impossible for a US manufacturer to access foreign markets, and without addressing that, there will still be a massive pull factor to move production to any other nation that will not be subject to the CET of the target market, and if the move can be done without incurring any barriers to the US market, then US production becomes an unnecessary redundancy.
These points used to also be a very bipartisan one, as there are many videos from republicans and democrats, including prominent ones such as Nanci Pelosi, Barack Obama, Chuck Schumer, Bill Clinton, and even Bernie Sanders. (especially in their speeches from the early 2000's). Though each time there was an attempt to address it, there would be massive pushback from some stock holders and companies that profit from the trade issues, and the first sign of the stock market reacting emotionally, would lead them to back off, thus all of the issues they referenced, have only grown worse.
Great write up!
Well said...Yes we pay for the tariff on products, but at some point companies overseas have lots of excess product and will have to cut prices to keep up with volume reductions on good sold as well. As you said...their model is built on sales here not there.
Or complete Bollocks.
"For tariffs, the current strategy seems to be forcing other countries to the negotiating table."
No, that's just a fig leaf. There is no strategy here other than to make American businesses bow to Rump.
Currently 2 major nations have who have previously refused new trade deals, are now entering in trade talks, with support for a tariff-free trade agreement.
The 2 so far are Vietnam, and India.
India has a population of over 1.4 billion, and has a rapidly growing middle-class. This means that completion of the agreement will grant US manufacturers access to at least the middle and upper class of India's economy. While also resulting in tariffs that are lower than before.
Israel has already agreed to a zero tariff agreement.
Other nations that previously suggested retaliatory tariffs (including the UK), have paused such efforts, and have agreed to engage in trade negotiations with the US with agreements to cut tariffs, but no word on if they are open to a zero-tariff deal.
Japan has agreed to engage in new trade negotiations, but has not released any statement one way or the other as to whether they are open to a zero-tariff agreement.
South Korea, Thailand, and Argentina have released statements that they are open to negotiate to cut tariffs and trade barriers, though it it is clear that they are not in favor of a complete elimination of tariffs.
Mexico and Canada are in talks of essentially expanding USMCA, thus essentially expanding the range of items covered and possibly also closing some loopholes such as the over-limit schedule.
Numerous other nations have have social media posts from political officials about a willingness to enter trade talks but no official actions from their governments.
Other nations such as China are more reluctant, and have push for additional retaliatory tariffs, but they have had little to no impact on the US because China has traditionally had high tariffs on the US and before this new policy, had many very high tariffs, furthermore, for manufactured goods from any large corporation, their policies effectively require that the company open a factory within China, thus at best you will have US designed goods manufactured in China if you want to sell to their population. Those goods are also exempt from any tariffs, thus those items are not impacted, and even on the stock market where many stocks that rely more heavily on international trade and pay dividends. The ones that are in full compliance with China's policies, have not been impacted by those retaliatory tariff policies. China has long established government programs to subsidize industries, and have largely used it for long term profits, for example, offsetting costs so that a Chinese steel producer can sell refined steel for a similar cost to unrefined ore, thus bankrupting US steel makers, then once they are out of business, drastically raising steel prices above normal market rates, thus recouping the subsidies and turning greater profits. Such mechanisms are likely being used nor to support industries that will face a tariff barrier while political battles take place.
Overall, the strategy is already working for many countries, and retaliatory efforts do not have much of an impact because they are largely markets that US manufacturers could not access anyway, thus at best, you are dealing with niche foreign markets where a subset of the rich economic class would import directly or through intermediaries that cater to their wants. In those cases, such items would still sell unless those countries impose non-monetary restrictions along the levels of a trade sanction.
Delusional
It is not delusional for those countries to engage in fast tracked trade talks, hence why so many are doing it now. According to a very recent news article from Forbes, there are now over 50 countries that are scheduling trade negotiations.
Of the many countries entering the fray, some additional notable ones are announcing actions they can immediately take.
"Cambodia: Cambodia’s commerce ministry sent a letter to the Trump administration pledging to cut tariffs on its U.S. imports from 35% to 5%"
(Cambodia has seen rapid industrial growth with substantial economic gains from establishing an export focused manufacturing industry. The economic growth are also leading to increases in GDP and granting residents easier financial access to luxury goods).
United Kingdom: "according to The Washington Post, as the government has already been in negotiations with the Trump administration, offering to lower tariffs on U.S. goods and preparing to offer a lower tax rate for American companies in the U.K."
Taiwan: "President Lai Ching-te said Sunday Taiwan will not impose any retaliatory tariffs on U.S. imports and he wants to negotiate with the Trump administration with a goal of “zero tariffs” between the U.S. and Taiwan, Reuters reports, with the leader also pledging to increase Taiwan’s U.S. investments."
Overall there is a lot of news coming in rapidly and countries around the world are now working as fast as they can to negotiate trade.
United Kingdom: "according to The Washington Post, as the government has already been in negotiations with the Trump administration, offering to lower tariffs on U.S. goods and preparing to offer a lower tax rate for American companies in the U.K."
A 'free trade' agreement has been discussed between the UK & US many times but the US has always refused one, this is no different, and The Donald slapped us with a 10% tarif even though the trade between the 2 countries is pretty even. Good friend the US is turning out to be
Canada is not in talks with the US to "expand" USMCA, called CUSMA here. The current president blew it up by imposing tariffs on the basis of a manufactured "crisis" on the northern border - fentanyl and illegal immigration, neither of which are significant issues.
CUSMA/USMCA has a built-in dispute resolution mechanism that the US president couldn't be bothered to use. There's little use trying to negotiate trade deals with the US because they can be abrogated on a whim by the president.
The built in dispute mechanisms are for items covered by the agreement, and has no bearing on disagreements or disputes on items outside of the agreement. The current tariffs do not impact items covered under USMCA, and those items are not being disputed either. The focus of expansion are in preliminary talks but no serious action will be taken for at least 5 weeks ad they do not want to take such major actions before the election.
True. What the Orange Fellow doesn't understand - and many comments here reflect - is that there are two issues a play. First, the tariffs being levied against countries by the US are mostly nonsense numbers invented to impose a counter tariff. Second, and most importantly, the world now sees that any "deal" made with the US isn't worth the paper it's printed on. The US is an unreliable partner and can't be trusted. Trade deals will be made in the short term to placate and tamp down the problem. In the longer term countries will do what is possible to limit exposure to the US. America can no longer be trusted.
How did you arrive at that answer?
I have a Master's Degree in Economics, focused on trade and development. The scattershot "tariff policy" of the Rump Administration makes no sense and will cause far more damage to American consumers than a classical thoughtful approach to trade negotiation. I can only conclude that the intention is not the flattening of tariffs around the world (penguins don't impose tariffs on U.S. goods) but a unilateral (and illegal) exercise of power for some other purpose. The first effect of the "policy" is providing a false narrative ("We're bringing in billions of dollars") that provides an excuse for replacing progressive income and corporate taxes, to the benefit of the wealthy, with highly regressive consumption taxes, to the detriment of everybody else. Given what we know of Rump, that seems to be the primary motivation.
John Williams...never mind. You obviously have nothing worth saying.
I think both sides raise legitimate points on the issues of trade. You seem to be trying to create legitimacy by stating you have a master's degree in economics, but then you use silly terms like "Rrump".
The reason the Trump Administration included the Heard and McDonald islands was not because penguins have unfair trade policies, It was to prevent companies from using uninhabited places to circumvent the tariffs.
I didn't write "Rrump", I wrote "Rump". Believe it or not, economists are allowed to have a sense of humor.
You don't really expect Kodak to revive its camera business in the U.S. to compete with Japan, South Korea and China, do you? The idea that the tariffs are in support of some industrial policy to foster domestic production is simply ludicrous and betrayed by the contradictory and counterproductive way in which the administration is going about it.
No, the tariffs serve another purpose, and that is to get rid of progressive taxation and replace it with regressive taxation, so those at the top can contribute less to the community that is the United States.
You keep throwing around the label of economist like we are to be so impressed. Are you employed in this capacity somewhere or was this just a major in college. Many actual economists support President Trump and had very negative opinions of former President Dementia. I meant Biden but you know just a joke like yours.
Such a wonderful contribution to the discussion. I can't tell you how much I appreciate and have learned from your thoughtful comment.
Correction: John Williams has something to say but, for technical reasons, is unable to share it publicly.
Exactly. If you really believe that tariffs are paid by other countries as your president claims, you are clueless. And if you think America can bring back manufacturing by "taking back" industries that left for economic reasons and then demand (force?) other countries to buy American-made products in exchange for lower tariffs, you are also clueless. No country can be forced to buy more American goods - especially when their economies have been harmed by tariffs. Lastly, no country will trust America to honour any trade deal knowing that with the swipe of a Sharpie and fake drugs crisis the deal will be broken.
I do not have a Master's Degree in Economics - In fact, I'm probably pretty much illiterate on the subject so please forgive me for my stupidity - I still contend no one knows with certainty what the tariff issue will produce but perhaps we need to do a reset on where the country is heading long term in terms of the national debt.
I do think free trade over the course of time possibly hurts our standard of living - Whether it's a meaningful hurt or not I really don't know with certainty - But what's more disturbing to me is all the criticism displayed with Trump wanting to create a higher level of tariffs and from what I can see no one is discussing tariffs that have been in place against us for years - The media as a whole rips Trump apart yet I've seen nothing discussing whether Trump's tariff chart on what other countries charge us in tariff fees is accurate or not - I have my own reservations on the tariffs but that doesn't make my opinion correct.
I do see a continuing need for the Democratic party to bitch and moan and fight Trump on EVERYTHING he does while offering up no possible alternative paths - And yes, I'm sure the Republicans would do the same - At least the Republican's aren't asking for my preferred pronouns and no one on the Republican side is trying to allow prisoners to get free gender reassignments - I simply don't care what people want to do with their own bodies assuming they're adults - But don't expect my tax dollars to float that boat.
I do expect elected officials to act as adults with each other and work together on compromises should the need arise - Both parties tend to act like fools so much of the time.
Enough politics.
Formula? The same one that included uninhabited islands but excluded Russia, Iran, and North Korea? I'd love to see the math.
The uninhabited island thing was more of a fake hit piece, since it is easier to mock someone if claiming that they are trying to tariff penguins. It is a case of ignoring or omitting context, then making up the context to fit a narrative. When tariffs or other economic actions are taken against a nation, it includes all territories of the nation so at to preempt the creation of any loophole. Furthermore, the uninhabited island mysteriously contains a fishery.
Without an exhaustive list approach, you open the way for loopholes, especially in cases where billions in trade is at stake, you can bet that every possible loophole will be utilized, and territories such as that are easy loopholes that can be manipulated to get around a tariff, but no matter how remote the chances are, including a few sentences which takes virtually no effort, closes the loophole preemptively.
When examining economic situations like this, it is important to try and be as objective as possible. If you see a report where there is a ton of ad hominem and emotionally charged language while also oversimplifying things, chances are that they are also misleading on many things.
Exhaustive language is common on legal documents where the goal is to avoid loopholes.
LOL. Let me explain it to you simply. You put tariffs on an uninhabited island. This shows carelessness at best - or simple incompetence at its worst. It is not a "fake hit piece". The credibility of the tariff policy depends on accuracy, truthfulness, and real economics. Telling the public that the foreign government pays the tariff (or that Mexico will pay for the wall) isn't going to fly when it is a lie. Get a grip.
It is not hard to use an island as a launch point for trade, and given the nature of islands, such territories are easy to change hands. Exhaustive specifics are common since it takes no effort and closes 2 major loopholes and numerous others. For example, the target nation can no longer use an island as a trade middleman to circumvent US tariffs applied to the target nation. And if language such as "all territories" is left as is without additionally specifying the territories and assigning specific tariff schedules to them, then it is not hard for such an island to temporarily change hands until tariff disputes end.
Look up any contract conducted in a low trust environment, and you will see such language extensively used, with the addition of heavy use of severability clauses.
Anyone dealing in contract law will set up mock hearings to challenge their own contracts in order to find loopholes and flaws.
When drafting such documents, you review case law and past court cases between others in the industry, you then challenge your own document, then you have someone else in legal challenge it as well, you then draft a new document that is battle hardened.
The ones working for those news organizations would have had more experience than they would have liked with contract law, thus such claims are highly disingenuous.
PS, we are now at over 70 countries now seeking to engage in trade negotiations.
You do realise that at best its 70 countries, assuming that is true, doing a damage limitation exercise and nothing more. I can only speak from the UK, but your President has done more damage internationally than just tariffs based on a perceived imbalance of trade. If you want balanced trade then you need to make and sell things that people in other countries want to buy, maybe, just maybe that is the USA's problem. Cars seem to get a lot of mention about how we in Europe don't buy American cars, well theres a good reason for that, and its purely practical, we don't tend to buy very large gas guzzling vehicles, so try making a quality product that our market is interested in and people might buy it
When you breezily mix trade imbalances with 'high tariffs', and talk about the new USA tariffs as 'reciprocal', then it's difficult to take your other points seriously.
A number of these countries don't have high tariffs on American goods, but they export a lot to the USA, while they just are not the target market for American manufacturer's to sell to. The average monthly income in Cambodia is around $300 US. There's a lot of countries who are in this situation where there's a skewed single balance of trade. Similar story in Lesotho due to diamonds, and elsewhere around the world. Do you think there's some untapped market for American products there that's being protected by the single digit average tariffs Cambodia levies on US imports? They've been hit with a 47% tariff essentially because they're poor, and the American market wants what they have or make.
No one is mixing them, instead it is a nuanced issue. There are some that are using reductio ad absurdum arguments who claim as such but it doesn't reflect reality or the claims made by Scott Bessent.
No one is expecting a zero delta trade with cambodia. Depending on the economics and item selection of a country, there will be natural imbalances. What the current negotiations are seeking to fix are thumbs on the scales of trade. For example, if the US and a foreign country both make rice, and there is a trade imbalance of rice between the 2 countries. The target country's residents will likely have a preference for the nation's own rice products, which would lead to a natural trade imbalance.
The people using the reductio ad absurdum arguments, will effectively be saying that the imbalance would remain exactly the same even if the target country drops their 700% tariff on rice, while everyone else with logic and reasoning, would understand that the imbalance would shrink to a value representing natural market forces.
For example, virtually no American long grain rice gets imported to Japan after their variable minimum market access quota is reached (which has a 25% tariff on American rice), thus after a small total import target is reached, the tariff on it goes to 778%. For the abrupt stop, is it due to people there simply getting tired of American rice each year, or does that 778% tariff have some kind of impact on the ability to sell American rice in Japan? If Japan removes that 778% tariff on American long grain rice, will the amount imported change or remain the same?
"No one is mixing them". I'm sorry, but the entire formula setting these is based on trade imbalances, and then calling the tariffs which the US is imposing 'reciprocal'. This is based completely on mixing the two.
"No one is expecting a zero delta trade with Cambodia". Assuming you mean balanced trade, yes, the explicit reason for the tariffs is based on the assumption that "persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing", and were calculated as "rates that would drive bilateral trade deficits to zero".
The position you're arguing just doesn't match up with what the people introducing and imposing the tariffs are saying. Pointing out the absurdity of this policy in the first instance isn't a reduction to absurdity, there's no reduction required. It's just absurd.
Simple exercise, what are the thumbs on the scales which require a 47% tariff on Cambodia?